The Bangladesh Bank on Tuesday asked four state-owned banks to recover from capital shortfall resulting from a surge in non-performing loans within these banks.
BB governor Abdur Rouf Talukder gave the instruction at a meeting held with managing directors of the four banks – Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank. The meeting aimed at reviewing the current status of the memorandum of understanding between the Bangladesh Bank and the four banks, BB officials said.
Non-performing loan (NPL) rate has risen significantly in the four state-run banks, leading to a notable increase in provision shortfall and consequently, the escalation of capital shortfall.
Central bank officials discussed excess non-performing loans, capital shortfall and provision shortfall within the MoU. Most targets set in the MoU have not been met.
Therefore, it has instructed the banks to achieve the remaining targets by December.
During this meeting, the governor placed greater emphasis on addressing the banks’ capital shortfall, urging them to recover within a short timeframe. Banks with a risk-based Capital Adequacy Ratio (CRAR) and Capital Conservation Buffer (CCB) below 12.5 per cent were directed to improve it to at least 12.5 per cent promptly.
According to Basel-III standards for bank accounts in the country, state-run banks are required to maintain a CRAR of 10 per cent and a minimum CCB of 2.5 per cent against risk-based assets.
At the end of June, Agrani Bank had the highest capital shortfall among the four state-run banks, amounting to Tk 3,768 crore, followed by Rupali Bank Tk 2,230 crore, Janata Bank Tk 2,189 crore and Sonali Bank Tk 10 crore, according to Bangladesh Bank data.
