Seven banks face Tk 15,387cr in capital shortfall

AKM Zamir Uddin | Published: 22:47, Aug 29,2017

 
 

A file photo shows Sonali Bank headquarters in Dhaka. Seven banks, including Sonali, faced capital shortfall of Tk 15,387.07 crore in total as of June 30 this year. — New Age photo

Seven banks faced capital shortfall of Tk 15,387.07 crore as of June 30 this year as the growing non-performing loans forced them to keep large amount of provision that ultimately worsened their capital base.
The seven banks are Bangladesh Krishi Bank, Sonali Bank, BASIC Bank, Rupali Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank and ICB Islamic Bank.
Bangladesh Bank officials said that the government had been recapitalising the state-run banks for long, but the initiative went in vain due to their excessive amount of defaulted loans.
As per the Basel III framework, the state-run banks are having capital shortfall with Sonali, BASIC and Bangladesh Krishi Bank on top of the list.
The overall capital adequacy ratio against the risk-weighted assets in the banking sector, however, increased to 10.86 per cent as of June 30, 2017 from 10.80 per cent as of December 31, 2016.
The CAR increased after the end of second quarter as a number of banks, excluding seven, were able to maintain a good amount of capital during the period.
As of June 30 this year, the total capital in the banking system stood at Tk 85,707.62 crore, up from Tk 83,758 crore as of December 31, 2016, according to the latest BB data.
The banks have to keep at least 10 per cent capital against their risk weighted-assets in line with the Basel III framework.
A BB official told New Age on Tuesday that a number of banks had disbursed loans to the weak clients and business entities in recent period which fueled their risk-weighted assets.
The BB data showed that capital shortfall of BKB stood at Tk 7,318.45 crore as of
June 30 from a shortfall of Tk 7,083 crore as of December, 2016, that of Sonali at Tk 2,619.22 crore from a shortfall of Tk 3,474 crore, that of BASIC at Tk 2,210.24 crore from a shortfall of Tk 2,684 crore, that of Rupali at Tk 740.58 crore from a shortfall of Tk 714 crore, that of ICB Islamic Bank at Tk 1,475.25 crore from a shortfall of Tk 1,451 crore, that of BCBL at Tk 312.85 crore from a shortfall of Tk 345 crore and that of RAKUB at Tk 710.48 crore from a shortfall of Tk 742 crore.
State-owned Janata Bank and Agrani Bank, however, successfully kept their required minimum capital in the second quarter although they faced a capital shortfall of Tk 70.29 crore and Tk 442.63 crore respectively as of March 31.
The capital base of the seven banks declined due to rising defaulted loans as they had to maintain huge provision against the classified loans, the BB official said.
The BB data showed that the amount of defaulted loans, excluding the loans that have been written off, in the banking sector stood at Tk 74,148 crore as of June 30, 2017, rising from Tk 62,172.32 crore as of December 31, 2016.
Majority of seven banks continued to face irregularities and financial fraudulence as they have not taken effective measures to bring credit discipline and to establish corporate governance, he said.
In its financial year’s budget for 2017-18, the government kept aside Tk 2,000 crore to meet state-run banks’ capital deficit.
Economists and experts frequently criticized the government initiative of recapitalisation in the state-run banks as the same measure earlier did not put any positive
impact on the financial health of the banks, the BB official said. 

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