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Government may recapitalise state banks

  • Published at 07:49 pm August 18th, 2013
Government may recapitalise state banks

Finance Minister AMA Muhith Sunday lambasted the management and executives of the state owned banks for losing even their capital due to the poor management.

“You have eaten up the money given repeatedly to improve the capital base. It’s not good at all for the country’s banking industry,” he told a meeting with the chairmen and CEOs of six state-owned commercial and specialized banks at the finance ministry.

Six banks are Sonali, Janata, Agrani, Rupali, Basic and BDBL.

Banking Secretary Dr M Aslam Alam and Bangladesh Bank Governor Atiur Rahman were also present at the meeting.

“You should be more cautious and responsible in giving loan to the clients,” Muhith said, “It is now more applicable for Sonali Bank and Basic Bank.”

The meeting took stock of the financial status of the banks, meeting sources said.

The minister, however, assured the government would consider recapitalising banks despite the sorry state in the country’s state banking.

“All the performance indicators are now going down because of big scams like Hall-mark and Bismillah groups,” an official who attended the meeting quoted Muhith as saying. The minister asked the bankers to be responsible for performing well.

“Why the chairman and managing directors of the state banks giving loan to the clients without checking real situation of their investment? Client’s financial situation should be verified repeatedly,” he said, asking the bankers to carefully handle the people’s deposit.

“The financial statuses of the state-owned commercial banks are not good and the government has decided to recapitlaise them,” Muhith told reporters after the meeting. “We have already allocated fund in the current budget.”

Meeting sources said Tk50bn would be provided to four state-owned commercial banks, Sonail, Janata, Agrani and Rupali under the recapitalisation scheme.

The meeting also discussed about the World Bank’s concern over the capital shortfall of the banks.

The state-owned banks’ capital shortfall surged by 357% in the last six months due to a sharp rise in their classified loans, resulted mainly from credit scams. According to Bangladesh Bank statistics, the banks had a capital shortfall of about Tk91bn on June 30, a big jump from about Tk20bn on December 31 last year.