The capital base of the banks deteriorated further during the January-March period of the current year with the capital shortfall of thirteen banks, including seven state-owned banks, increasing by Tk 2,288 crore as the volume of defaulted loans continued to remain high.
The banks faced a total Tk 25,901 crore in capital shortfall while the figure was Tk 23,612.43 crore at the end of December 2019.
At the end of September last year, the volume of capital shortfall in the banking sector was Tk 17,658.32 crore.
According to the Bangladesh Bank data, five state-owned commercial banks, two state-owned specialised banks, five private commercial banks and one foreign bank witnessed capital shortfall at the end of March 2020.
The banking sector is facing acute capital shortfall as the rising number of non-performing loans are forcing them to keep aside a large amount as provision, weakening the entities’ capital bases, said a high official of the central bank.
Bankers and economists identified the government’s faulty policies, including the introduction of loan rescheduling on easy terms and its sympathetic approach towards large defaulters, as major reasons behind the surge in NPL.
The thirteen banks are Bangladesh Krishi Bank, Sonali Bank, Janata Bank, Agrani Bank, ICB Islamic Bank, Basic Bank, Bangladesh Commerce Bank, Rajshahi Krishi Unnayan Bank, Rupali Bank, Padma Bank, Community Bank Bangladesh and NRB Global Bank and the National Bank of Pakistan.
According to the Bangladesh Bank guidelines on risk-based capital adequacy, the banks have to maintain a minimum capital adequacy ratio (CAR) — which is a bank’s capital reserve to cover its risk exposure — of 12.50 per cent by 2019, in line with the BASEL III requirement.
As of March this year, the banks’ capital adequacy ratio (CAR), which determines the adequacy of the banks’ capital in managing their risk exposures, stood at 11.35 per cent, down from 11.65 per cent three months earlier.
According to the latest data, Bangladesh Krishi Bank has the highest capital shortfall at Tk 9,762 crore, followed by Sonali Bank with a shortfall of Tk 5,790 crore, Janata Bank with Tk 2,563 crore, Agrani Bank with Tk 2,475 crore, Basic Bank with Tk 1,054 crore, Rajshahi Krishi Unnayan Bank with Tk 856 crore and Rupali Bank with Tk 444 crore.
Among the private commercial banks, ICB Islami Bank’s capital shortfall stood at Tk 1607 crore, Bangladesh Commerce Bank’s at Tk 935 crore, Padma Bank’s at Tk 325crore, Community Bank Bangladesh’s at Tk 8 crore, NRB Global Bank’s at Tk 8 crore while foreign-owned the National Bank of Pakistan has a shortfall of Tk 77 crore.
According to the data, the amount of NPLs in the banking sector stood at Tk 92,510 crore at the end of March this year, accounting for 9.03 per cent of the total disbursed loans.
The country’s banks were maintaining the lowest CAR compared with neighbouring India, Pakistan and Sri Lanka.
In the last 10 years, the government has supplied a total of Tk 17,521 crore as capital to the ailing state banks.
Economists have raised concerns about the practice of recapitalising state-owned banks with budgetary allocations, saying that the trend would not help to improve the health of these banks.
They were of the opinion that it would rather encourage loan defaults.
Recently, Sonali Bank has placed a demand for Tk 10,000 crore in capital from the government.
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