10 banks suffer Tk 18,383cr provision shortfall

Ten banks, including six state-owned entities, suffered Tk 18,383 crore in capital shortfall at the end of March quarter this year due to high non-performing loans, according to central bank data.

The capital shortfall in the banks dropped 31.12 per cent or Tk 8,304 crore at the end of March considering the Tk 26,687-crore capital shortfall at the end of December, 2018.

As per the BASEL-III requirement, banks are supposed to keep 10 per cent of their risk-based assets or Tk 400 crore, whichever is higher, from their capital. A failure to do so is considered as bank’s capital shortfall.

On the other hand, the banking sector suffered Tk 11,776 crore in capital shortfall at the end of March whereas the sector witnessed Tk 2,553 crore capital surplus at the end of December this year.

Policy Research Institute executive director Ahsan H Mansur told New Age that the incidents of provision shortfall happened mainly due to increase in non-performing loans.

Speaking about the state-owned banks, Ahsan said that the government was liable for the irregularities in SOBs and it will have to inject capital to address the shortfall.

Speaking about the private commercial banks, the PRI executive director said that the banks must be stopped from issuing dividend and then they should also be asked to fulfil the shortfall within a certain period of time.

Even if they fail to recapitalise and fulfil the shortfall, the central bank should strictly ask them to merge with well managed banks, he said.

The overall capital shortfall in the banking system suggests that the weak banks have become weaker as they used to issue dividend to their shareholders from the retained earnings, he said.

Non-performing loans also known as defaulted loans in the country’s banking sector increased to Tk 1.11 crore at the end of March this year, excluding the Tk 30,000 crore written-off loans.

While, recovery of another Tk 80,000 crore loans was stalled by courts.

Of the 10 banks, state-owned commercial and specialised banks are: Janata Bank, Agrani Bank, Rupali Bank, BASIC Bank, Bangladesh Krishi Bank, and Rajshahi Krishi Unnayan Bank.

The list also includes three private commercial banks — Bangladesh Commerce Bank, ICB Islami Bank and AB Bank — and National Bank of Pakistan.

Provision shortfall in Bangladesh Krishi Bank increased the most — Tk 437 crore, to Tk 8,884 crore at the end of March this year from Tk 8,447 crore three months ago.

Agrani Bank witnessed second highest amount of provision shortfall — Tk 171 crore, during the January-March quarter. The figure of provision shortfall increased to Tk 1,054 crore from Tk 883 crore.

AB Bank’s provision shortfall increased by Tk 276 crore to Tk 376 crore from Tk 100 crore, the shortfall stood at Tk 154 crore in Rupali Bank from provision surplus of Tk 20 crore.

The figure of shortfall in ICB Islami Bank stood at Tk 1,569 crore, in RAKUB at Tk 734 crore, in BCBL at Tk 434 crore, in BASIC Bank at Tk 236 crore, in National Bank of Pakistan at Tk 54 crore.

Sonali Bank, which has suffered Tk 5,320 crore provision shortfall at the end of December last year, has managed to make Tk 13 crore provision surplus at the end of March this year.

News Courtesy: www.newagebd.net