Nine banks face Tk 16,507cr capital shortfall

A file photo shows Agrani Bank headquarters in Dhaka. Nine scheduled banks, including Agrani Bank, faced capital shortfall of Tk 16,507.38 crore as of March 31 this year. — New Age photo

Nine scheduled banks, burdened with huge amounts of defaulted loans, faced capital shortfall of Tk 16,507.38 crore as of March 31 this year Bangladesh Bank officials said that excessive defaulted loans in the nine banks had mainly deteriorated their capability of keeping required capital in line with international standards.
The nine banks are Bangladesh Krishi Bank, Sonali Bank, BASIC Bank, Janata Bank, Agrani Bank, Rupali Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank and ICB Islamic Bank.
As per the Basel III framework, the state-run banks are in 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 decreased to 10.68 per cent as of March 31, 2017 from 10.80 per cent as of December 31, 2016.
A BB official told New Age on Monday 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 banks have to keep at least 10 per cent capital against their risk weighted-assets in line with the Basel III framework.
As of March 31 this year, the total capital in the banking system stood at Tk 84,424.28 crore, up from Tk 83,758 crore as of December 31, 2016, according to the latest BB data.
Some private commercial banks were able to keep higher capital in the first quarter of this year than that of their required amount which increased the overall capital in the banking sector, the BB official said.
The BB data showed that capital shortfall of BKB stood at Tk 7,253 crore as of March 31 from a shortfall of Tk 7,083 crore as of December, 2016, that of Sonali at Tk 2,558 crore from a shortfall of Tk 3,474 crore, that of BASIC at Tk 2,962 crore from a shortfall of Tk 2,684 crore, that of Rupali at Tk 637.88 crore from a shortfall of Tk 714 crore, that of ICB Islamic Bank at 1,465 crore from a shortfall of Tk 1,451 crore, that of BCBL at Tk 340 crore from a shortfall of Tk 345 crore and that of RAKUB at Tk 779 crore from a shortfall of Tk 742 crore.
State-owned Janata Bank and Agrani Bank faced a capital shortfall of Tk 70.29 crore and Tk 442.63 crore respectively as of March 31 although they did not suffer any shortfall in the last quarter of 2016.
The capital base of the nine banks declined due to rising defaulted loans as they had to maintain huge provision against the non-performing loans, the BB official said.
The BB data showed that the amount of defaulted loans in the banking sector stood at Tk 73,409 crore as of March 31, 2017, rising from Tk 62,172.32 crore as of December 31, 2016.
The 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.
The government is going to keep an allocation in next financial year’s budget to meet state-run banks’ capital deficit, according to a finance ministry source.
The government may allocate Tk 1,700 crore for the state-run banks in the coming budget for FY 2017, 18.
The government also allocated Tk 2,000 crore to meet the capital shortfall of the state-run banks this financial year.
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.

Source: New Age


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