A capital shortfall of Tk 24,783 crore is looming large on 11 banks in the first quarter of 2021, which pointed out the fragile health of the lenders.
The banks are Bangladesh Krishi Bank, Sonali, Agrani, ICB Islamic, Rajshahi Krishi Unnayan, BASIC, Bangladesh Commerce, Rupali, Janata, Padma, and AB Bank.
The main reason for the large capital shortfall is the corruption which was perpetrated at the banks.
The highest capital shortfall of Tk 11,229 crore belongs to Bangladesh Krishi Bank, an increase of 4 per cent from 3 months ago, as stated by the Bangladesh Bank’s data.
The capital shortfall of Sonali Bank widened from Tk 3,063 crore to Tk 3,697 crore during that time frame.
On the other hand, the banking sector had an excess capital of Tk 16,562 crore in March 2021, an increase from Tk 15,930 crore 3 months ago.
The capital position, between January and March 2021, at Janata Bank has improved massively due to a regulatory forbearance extended by the central bank. The regulator’s move would assist the state-run bank to keep the provision against unclassified and defaulted loans in phases.
A regulatory forbearance is a policy that permits financial institutions to continue operating even when their capital is fully depleted.
Even though the bank got the forbearance, Janata Bank’s capital shortfall stood at Tk 417 crore in March 2021 in contrast to Tk 5,475 crore 3 months ago.
Md Abdus Salam Azad, the Janata Bank Managing Director, stated that the bank now enjoyed a capital surplus of Tk 6,017 crore as it managed another regulatory forbearance last month.
The central bank allowed the bank to keep the required capital in phases in the next four years.
“This has helped us make a net profit of Tk 14.45 crore last year,” Azad said. The capital shortfall of BASIC Bank stood at Tk 1,072 crore in March, down 28.15 per cent a quarter ago.
An official of the bank stated that as much as 90 per cent of the defaulted loans, which were disbursed between 2009 and 2013, are uncollectible.
A minimum of Tk 4,500 crore was swindled out of the bank, and a number of senior officials and board members, including then BASIC Bank Chairman Sheikh Abdul Hye Bacchu were allegedly involved.
Between 2009 and 2013, the bank also mobilised long-term deposits at a higher interest rate. The deposits have now become a burden for the bank and are one of the main reasons for the capital shortfall.
The official stated that BASIC Bank can assist the lender manage the balance sheet smoothly and make a profit if the bank can get low-cost deposits from the government agencies.
In March, the average capital adequacy ratio, a measurement of a bank’s available capital expressed as a percentage of risk-weighted credit exposures, stood at 11.67 per cent in the banking sector, down from 11.64 per cent three months earlier.
This means the overall capital base strengthened in the first quarter of 2021.