International Monetary Fund (IMF) has recommended the government to refinance within December six state-owned banks to help make up their capital shortfall of around Tk100bn.
In response, the finance division agreed to provide Tk41bn to meet the banks’ minimum demands for now, Banking and Financial Institutions Division Secretary told Dhaka Tribune on Monday.
He said the banks will have to strictly comply with two major conditions – execution of the MOU with Bangladesh Bank and automation. A committee has already been formed to monitor and scrutinise execution of the conditions.
The four-member committee, headed by additional secretary of the Banking and Financial Institutions Division Amalendu Mukherjee, has been asked to submit the business plan for the banks, sources in the banking division said.
After examination of the matter by the committee, the banking division would request the central bank to arrange allocation of the Tk41bn from the current national budget to distribute among the six state-owned banks, said a senior official.
He said the finance division has already provided Tk9bn to Investment Corporation of Bangladesh (ICB) to establish a refinance scheme to prop up the country’s stock markets. As a result, the budget amount to meet capital shortfall declined to Tk41bn from Tk50bn.
As per the condition, the banking division asked the banks to follow their agreements (MOU) with Bangladesh Bank include, restrict the lending to Tk10m if the bank’s credit rating falls below BBB. Sonali Bank has already restricted its credit limit to a client to Tk10m.
The bank also formed a risk management committee to comply with Bangladesh Bank’s risk management guidelines as per the banking division condition.
“The refinance fund is very small as compared to the huge big shortfall,” managing director of a state-owned bank told Dhaka Tribune.
He said it would not be possible for the banks to return to their normal condition unless the shortfall is made up.
In August, Finance Minister AMA Muhith rebuked the chairmen and CEOs of the state-owned banks, saying they have eaten up the money given repeatedly to improve the capital base. “It’s not good at all for the country’s banking industry.”
On September 9, the government sought financial assistance from the World Bank to help the state banks meet a huge capital shortfall, stemming from years of bad governance.
In accordance with the WB aide-memoire, four state-owned commercial banks have a cumulative capital deficit of Tk176bn while Bangladesh Bank seeing the figure at Tk103bn as of June last fiscal year.
With the huge capital deficits, the banks will face problems in international transactions and a dearth of confidence in the local market as well, the WB said.
