Eleven banks face Tk 8,632 crore in provision shortfall

Staff Correspondent | New Age Jun 21,2020

Eleven scheduled banks including four state-owned banks suffered Tk 8,632 crore in provision shortfall at the end of March this year, exposing a sorry state of their financial health.

The banks which faced provision shortfall are: Sonali Bank, Agrani Bank, Rupali Bank, BASIC Bank, AB Bank, Bangladesh Commerce Bank, Dhaka Bank, Mutual Trust Bank, National Bank, Social Islami Bank and Trust Bank.

As of March this year, state-owned BASIC Bank posted highest Tk 2,734 crore in provision shortfall followed by Sonali Bank Tk 1,362.54 crore, Agrani Bank Tk 1,150.46 crore and Rupali Bank Tk 795 crore.

AB Bank’s provision shortfall stood at Tk 680 crore, Bangladesh Commerce Bank’s Tk 570 crore, Mutual Trust Bank’s Tk 280 crore, Dhaka Bank’s Tk 182 crore, National Bank’s Tk 487 crore, Social Islami Bank’s Tk 259 crore and Trust Bank’s Tk 98 crore.

Experts said that the banking sector had been under various pressures due to lack of good governance and high amount of defaulted loans.

Now the pressure is increasing owing to the economic fallout created by the coronavirus pandemic in the country, they said.

The failure of the banks to keep provisions against their defaulted loans reflects a sorry state of the banks as well as risks involved with the depositors’ money, said a senior official of the Bangladesh Bank.

According to the central bank regulations, banks are supposed to keep 0.25 per cent to 5.0 per cent provision against loans under general category, 20 per cent against substandard category, 50 per cent against doubtful loans, and 100 per cent against bad or loss category.

Keeping provision against both classified and unclassified loans from banks’ operating profits is a must to mitigate risks.

The high amount of non-performing loans in the banking sector is largely responsible for the huge provision shortfall, bankers said.

At the end of March this year, the amount of NPLs in the banking sector stood at Tk 92,510 crore, which is 9.03 per cent of the total disbursed loans.

However, the banks’ non-performing loans declined by Tk 1,821 crore in three months till March this year as the central bank asked the country’s banks not to classify loans for nine months till September to help businesses combat the economic fallout of coronavirus.

Bankers said that the defaulted loans in the January-March period declined as the central bank had barred banks from downgrading any loan for the borrowers’ failure to pay instalments in the January-September period this year.

No bank loan will be treated as a defaulted loan until September 30 this year, if borrowers fail to repay during the period, said a circular issued by the Bangladesh Bank on June 15 this year.

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