State banks fail to improve bad loan situation

The default loan situation of the state-run banks has not improved while they received budget funds to meet capital shortfalls, observed Finance Division. It said the recapitalisation funds could only improve the banks’ balance sheet. The observations came at a recent Finance Division meeting on capital shortfalls of seven state-owned banks with Finance Minister AMA Muhith in the chair. The meeting said the capital shortfall of the BASIC Bank declined by Tk706 crore during last two fiscal years though the bank’s overall default loan situation has not improved. BASIC Bank received Tk2,390 crore from the budget allocation under the government recapitalisation programme. According to the Finance Division working papers, the capital shortfall of the BASIC Bank is Tk1,934.5 crore while the capital reserve ratio was only 7.55% in 2015. An amount of Tk9,457.60 crore were disbursed from the five years budget allocations for recapitalisation. Sonali Bank took the highest amount of recapitalisation fund from budget, BASIC got the second highest while Bangladesh Krishi Bank took recapitalisation fund every year since the FY2011-12. Now, a total of Tk2,000 crore were allocated in the revised budget of the current fiscal year. In the FY2013-14, International Monetary Fund recommended the government coming to the rescue of the state banks allocating recapitalisation funds in the budget. The financial condition of the two state-run banks was bad due to massive loan anomalies. However, officials who attended the meeting said the budget deficit would increase if they met the banks’ capital shortfalls from the public money and bonds. BASIC Bank was not able to reduce the non-performing loans and its liquidity fund reached Tk1,500 crore, official sources said. The sources said most of the funds were utilised to buy the government bonds. The government disbursed Tk9,457.60 crore during last five years since FY2011-12 for recapitalisation of state banks. As per the summary of Finance Division observations, Sonali Bank received Tk2,794.81 crore,  BASIC Bank Tk2,390 crore, Agrani Bank Tk1,081 crore, Janata Bank Tk814 crore, Rupali Bank Tk272.5 crore, Bangladesh Krishi Bank Tk789.77 crore and Rajshahi Krishi Unnayan Bank Tk318 crore. The total default loan of Sonali and BASIC is 28% of total amount in the country’s banking sector.