Six state-run banks and three private commercial banks are facing a total capital shortfall of Tk19,063.57 crore as of September this year, following failure to meet the minimum regulatory capital requirements.
The nine banks are: Agrani Bank, BASIC Bank, Janata Bank, Rupali Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, Social Islami Bank, and ICB Islamic Bank.
According to Bangladesh Bank (BB) guidelines on risk-based capital adequacy, banks have to maintain a minimum Capital Adequacy Ratio (CAR)—which is a bank’s capital reserve to cover their risk exposure—of 12% by 2019, in line with BASEL III.
As of September this year, the CAR of all nine banks stood at 10.89%, and 6.06% for six state-owned banks.
The state-owned commercial banks have failed to maintain the minimum capital adequacy requirements since 2013, said a BB general manager.
According to latest BB data, Bangladesh Krishi Bank has the highest capital shortfall which stands at Tk8,205 crore, followed by Janata Bank at Tk3,923.34 crore, BASIC Bank at Tk3,434 crore, ICB Islami Bank at Tk1,540 crore, Rajshahi Krishi Unnayan Bank at Tk668.53 crore, Agrani Bank at Tk662.70 crore, Bangladesh Commerce Bank at Tk307.93 crore, Rupali Bank at Tk286.21 crore, and Social Islami Bank at Tk35 crore.
“Capital shortfall is a very bad sign for a bank, which itself is a direct result of the bank’s default loans,” said AB Mirza Azizul Islam, a former finance adviser to a caretaker government.
Mirza added: “Foreign businessmen usually monitor the ratio of required capital and default loans of scheduled banks before investing. Such capital shortfalls will discourage them [from investing].”
He recommended that the central bank further strengthen its monitoring of the banking sector to prevent financial scams.
Since 2009 the government has injected Tk14,505 crore into state-owned banks, but these have yet to show any signs of strengthening their capital base, said a senior BB official preferring to remain anonymous.
“The amount of capital shortfall of Bangladesh Krishi Bank did not happen overnight. This has been happening since 1991,” said Mohammad Ismail, chairman of Bangladesh Krishi Bank.
He said 82% of their loans go to farmers, which they lend at a 9% rate of interest.
“Moreover, many of our loans have been rescheduled due to natural disasters. During the Sidr cyclone, the government waived many of our debts. So we have no liability for the capital shortfall of this bank,” Ismail added.
