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Provision shortfall at 12 banks soars to Tk10, 833.53 crore

  • Published at 10:48 pm December 10th, 2018
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Of the total, four are state-owned banks, and the remaining eight are private commercial banks, according to data from the Bangladesh Bank

Twelve banks faced a combined provisioning shortfall of Tk10,833.53 crore in the end of September, exposing their worsening financial health.  

Of the total, four are state-owned banks, and the remaining eight are private comercial banks, according to data from the Bangladesh Bank.

The banks are: Sonali, Agrani, Rupali, BASIC, AB, Bangladesh Commerce, Mutual Trust, National, Premier, Shahjalal Islami, Social Islami and Standard, Some of the banks had faced provisioning shortfall, because they had lent large amount of loans violating banking norms. The rising trend of default loans is largely responsible for the provisioning shortfall, experts say. 

According to Bangladesh Bank (BB) latest data, Agrani bank’s provisional shortfall was Tk866.81 crore, BASIC bank’s Tk3548.24 crore, Rupali bank’s Tk1,352.97 crore, Sonali bank’s Tk3, 544.64 crore,  AB bank’s Tk123.69 crore, Bangladesh Commerce bank’s Tk 421.14crore, Mutual Trust bank’s Tk95.92 crore, National bank’s Tk 261.41crore, Premier bank’s Tk96.71crore, Shahjalal Islami bank’s Tk 102.29crore, Social Islami bank’s Tk 357.50 crore and Standard bank’s provisional deficit was Tk62.21crore. 

As per the BB regulations, banks have to keep 0.50 percent to 5% provisioning against general category loans, 20% against classified loans of sub-standard category, 50% against classified loans of doubtful category and 100% against classified loans of bad or loss category.

The capital base of the 12 banks would erode significantly if they kept provisioning as per the central bank rules, said a BB official.

Former BB deputy governor Khondker Ibrahim Khaled said the banks have to keep the required provisioning from their operating profit, so they will raise their lending rate in the coming days to ensure they declare profits.

According to BB latest data, The non-performing loans (NPLs) of banks rose by a staggering Tk10, 030 crore in a period of three months to September this year, increasing the amount of stress loan in the banking sector to Tk99,370 crore.

The bad loan amount was 11.45% of total disbursed loans in the given month, according to the latest Bangladesh Bank (BB) data. In June, total bad loans in the banking system was at Tk89,340 crore, or 10.41% of total disbursed loans.

Former Bangladesh Bank governor Salehuddin Ahmed said it is the prime responsibility of banks to justify the eligibility of a company to get loans as well as its capacity to repay. 

“But this is absent in approving loans as the bankers are sometimes involved in corruption and give loans resorting to irregularities,” he added. 

Agrani, AB, Mutual Trust, Shahjalal Islami, Social Islami bank faced provision shortfall for the first time in recent years.

In last one year, BASIC bank’s provision shortfall rose by Tk126.7 crore stood at Tk3548.24crore,  Rupali bank’s provision shortfall rose by Tk107.63crore stood at Tk1352.97crore, Sonali bank’s rose by Tk643.73crore stood at Tk3544.64 crore, Bangladesh Commerce bank’s rose by Tk222.52crore stood at Tk421.14crore.

On the other hand, National bank’s provision shortfall decreased by Tk600.2crore to Tk261.41crore, Premier bank’s decreased by Tk62.69crore to Tk96.71crore and Standard bank’s decreased by Tk26.88crore to Tk62.21crore, according to BB.

Farmers Bank’s default loan stood at Tk3070crore

Farmers Bank’s default loan stood at Tk3, 070crore, 57.82% default of the total loan as of September. The total amount of disbursed loans of farmers banks stood at Tk5310.72 crore, of them Tk3, 070crore became default. 

The Farmers Bank’s Managing Director Ehsan Khasru told to the Dhaka Tribune, “We are now working on the reconstruction of financial and administrative systems. We have also taken various types of initiatives to lessen default loans. We will do new banking in the year 2019. The bank's current name also will be changed.”