The government is going to reduce the bank recapitalisation fund by 50% in next fiscal year’s budget while an amount of Tk3,000 crore has already been decided to be cut from the current allocation.
According to a Finance Division preliminary decision, recapitalisation funds will be reduced to Tk2,500 crore as an amount of Tk5,000 crore each was allocated in last and this fiscal years to meet the scam-hit state banks’ capital shortfall.
Besides, Tk3,000 crore will be cut from the revised budget of this fiscal year reducing the figure to Tk2,000 crore from initial allocation of Tk5,000 crore, as per decision taken by the last meeting of the Budget Management Committee.
Under the revised budget, state-run banks - Sonali, Janata, Agrani, Rupali and BASIC – will not get any further money to cover their capital shortfall.
Of the Tk2,000 crore allocation under the revised budget, around Tk1,200 crore has already been disbursed to BASIC Bank in last December.
Bangladesh House Building Finance Corporation will receive Tk200 crore from the allocation as Finance Minister AMA Muhith has already approved a summary of it.
The remaining Tk600 crore will be distributed among Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank and Ansar-VDP Bank, according to the revised budget proposal.
Of the eight state-owned banks, six had capital shortfall of a total of Tk14,054 crore as of December, 2015. Only Agrani Bank and Bangladesh Development Bank were in the surplus.
Bangladesh Krishi Bank had the highest capital shortfall of Tk6,676 crore, followed by BASIC Bank’s Tk3,050 crore, Sonali Bank’s Tk2,934 crore, Janata Bank’s Tk663.24 crore, Rajshahi Krishi Unnayan Bank’s Tk582.94 crore and Rupali Bank’s Tk145.50 crore.
A deficit of Tk31,536 crore in revenue earning last fiscal year and financial sector experts’ criticisms against such budget allocations to meet state banks’ capital shortfall as the misuse of the funds is highly likely in the corrupt banks prompted the government to cut the recapitalisation funds, officials said.
Senior Secretary at Finance Division Mahbub Ahmed said they were under pressure to disburse the funds among banks. He said some state banks, which don’t even need budget recapitalisation funds, also ask for the funds.
“We have faced huge pressures from the state bank authorities to disburse the money from the re-capitalisation funds in the current budget,” Mahbub Ahmed told the Dhaka Tribune. “Even some, who are not in need of the fund, are also placing demand.”
There are arguments that the state banks will need funds to achieve the Basell III standards as Bangladesh Bank has taken initiative to improve banks’ financial health by increasing their capital adequacy ratio (CAR) in line with Basel III standards. l
Recapitalisation fund is being termed as another “black hole” in Bangladesh financial sector after the largest loan scams at the state-owned Sonali and BASIC banks.
Tuesday, March 25, 2025
