Scam-hit BASIC, Sonali among four banks facing huge provision deficit

A file photo shows the Karwan Bazar Branch of BASIC Bank in Dhaka. Four banks including scam-hit BASIC and Sonali banks faced provision shortfall of Tk 5,352.56 crore against their general and defaulted loans as of December 31, 2015 although their shortfall was only Tk 153.36 crore a year ago. — New Age photo

A file photo shows the Karwan Bazar Branch of BASIC Bank in Dhaka. Four banks including scam-hit BASIC and Sonali banks faced provision shortfall of Tk 5,352.56 crore against their general and defaulted loans as of December 31, 2015 although their shortfall was only Tk 153.36 crore a year ago.

Four banks including scam-hit BASIC and Sonali banks faced provision shortfall of Tk 5,352.56 crore against their general and defaulted loans as of December 31, 2015 although their shortfall was only Tk 153.36 crore a year ago.
Another two banks which failed to keep required provision are Bangladesh Commerce Bank and National Bank.
The provision shortfall of Sonali Bank stood at Tk 1,666.38 crore as of December 31, 2015 against a provision surplus of Tk 393.34 crore as of December 31, 2014. As of December 31, 2015, BASIC Bank saw Tk 3,308.19 crore in provision shortfall from no deficit, Bangladesh Commerce Bank posted Tk 233.02 crore in shortfall from a deficit of Tk 46.39 crore and National Bank registered Tk 154.97 crore in shortfall from Tk 106.97 crore in deficit a year ago.
A BB official told New Age on Tuesday that the four banks which faced provision shortfall had earlier faced huge corruption resulting that their provision shortfall continued to increase.
He said that the provision shortfall in the banking sector declined in 2014 as banks regularised huge amount of defaulted loans by using the central bank’s relaxed policy.
The banks showed robust amount of net profits in 2014 as they were not required to keep provision against the rescheduled loans, the official said.
As per the BB regulations, banks have to keep 0.50 per cent to 5 per cent provision against general category loans, 20 per cent provision against classified loans of sub-standard category, 50 per cent against classified loans of doubtful category and 100 per cent against classified loans of bad or loss category.
The four banks which faced provision shortfall will have to count net loss for the last year as the banks must keep the provision from the operating profit.
After keeping the provision with the balance sheet and paying corporate tax to the government, the banks are allowed to enjoy net profit, the BB official said.
The central bank, however, has started a culture to rebate the banks to keep the provision instantly meaning that they (banks) are taken permission from the BB to keep the provision later.
Under the circumstances, the directors of the banks which face losses enjoy the profit, the official said.
The overall provision shortfall in the banking sector also increased by 437.93 per cent, or Tk 3,487.11 crore, to Tk 4,283.37 crore in 2015 from that of Tk 796.26 Tk crore in 2014, the BB data showed.
The provision shortfall in the state-owned commercial banks increased to Tk 4,567.33 from a surplus amount of Tk 669.28 crore as of December 31, 2014.
The private, foreign and specialised banks, however, posted a surplus amount of provision.
The provision surplus in the private commercial banks stood at Tk 51.99 crore as of December 31, 2015 against Tk 672.50 crore as of December 31, 2014, that of the FCBs to Tk 39,26 crore from Tk 95.67 crore and that of specialised banks to Tk 192.71 crore from a provision shortfall of Tk 2,233.71 crore.
Banks usually keep required amount of provision to mitigate financial risks, another BB official said.
Banks sanction and disburse loans to their clients from the depositors’ fund, so they (banks) have to keep the provision for the interest of their depositors, he said.
The BB will soon instructed the four banks to keep required provision against their general and defaulted loans, the official added.

Source: New Age

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