At the end of last year, Janata Bank’s defaulted loans stood at Tk 13,622.5 crore
Janata Bank’s capital shortfall rose at an alarming volume in the fourth quarter of last year.
But, it was not for an explosion of bad loans. Rather, it finally took stock of all the soured credit on its balance sheet and kept provisioning accordingly.
The actual capital shortfall of Janata Bank, which has the highest volume of default soured loans in the sector, came to light in the final quarter of 2020, said a top official of the central bank seeking anonymity.
In the December quarter, Janata’s capital shortfall stood at Tk 5,475.1 crore, rising by a staggering Tk 5,217.5 crore in just three months, according to the central bank’s latest data.
Keeping the required provisioning against bad loans is mandatory for the final quarter.
“That’s the reason for the big jump in capital shortfall of the bank,” he said, adding that a number of lenders take the deferral facility from the Bangladesh Bank throughout the year for keeping provision.
As per the central bank regulations, banks have to keep 0.50 per cent to 5 per cent in provisioning against general category loans, 20 per cent against classified loans of substandard category and 50 per cent against classified loans of doubtful category.
It is set at 100 per cent against classified loans in the bad or loss category.
At the end of last year, Janata Bank’s defaulted loans stood at Tk 13,622.5 crore, which was 24.9 per cent of its total outstanding loans. However, the bank has no provisioning shortfall now.
“We have maintained the required provisioning against default loans, which has helped to raise the capital shortfall in the final quarter last year,” said AKM Shariat Ullah, the chief financial officer of Janata Bank.
Not just Janata Bank, the capital shortfall of a number of banks has risen in the fourth quarter owing to keeping the required provisioning against loans.
“We will apply to the Bangladesh Bank for a deferral facility to keep provisioning against bad loans by this month and the bank will be able to exit from the capital shortfall owing to the BB’s regulatory forbearance,” Ullah said.
The financial health of the state-run bank has deteriorated mainly to a number of businesses, including Anon Tex and Crescent Group.
The bank lent upwards of Tk 10,000 crore to AnonTex and Crescent Group, going past its single-borrower exposure limit, found a BB probe.
AnonTex Group, a garment manufacturer, was also involved in money laundering, as per the BB’s probe report.
At the end of December 2017, Janata’s bad loans stood at Tk 5,818.60 crore. A year later, it amounted to Tk 17,224.9 crore owing to the huge loan irregularities.
Once considered a good performer among public sector banks, Janata has become a problem bank, said Salehuddin Ahmed, a former BB governor.
“There is no visible action plan of the bank for a turnaround.”
Ahmed cited the lack of good governance and widespread corruption as major reasons for the current dire situation prevailing at Janata and the other public sector banks.
The correspondent tried to reach the bank’s managing director Abdus Salam Azad over the phone yesterday but he did not respond.