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Ten scheduled banks, including five state-run, suffered Tk 15,340 crore in provision shortfall at the end of September this year mainly due to a surge in bad loans, as per the Bangladesh Bank data.
They are Agrani Bank, Rupali Bank, Janata Bank, BASIC Bank, Bangladesh Commerce Bank, Dhaka Bank, Mutual Trust Bank, National Bank, Standard Bank, and Bangladesh Krishi Bank.
A high official of the central bank said provision shortfall of most of the banks had increased in the third quarter due to their increasing trend of non-performing loans.
Eight or nine banks had been facing provision shortfall for long due to their ailing financial health, he added.
Janata Bank had the highest provision shortfall in the banking sector at the end of September.
Its required provision was Tk 9,594.41 crore but the actual provision was Tk 4,281.23 crore. Its bad loan amounted to Tk 13,837.17 crore, the highest in the banking sector.
National Bank’s provision shortfall stood at Tk 2,385.06 crore, the highest among private commercial banks.
Its required provision was Tk 4,374.46 crore but the actual provision was Tk 1,989.4 crore.
Provision shortfall is a very bad sign for a bank as it indicates poor financial health, said Salehuddin Ahmed, former governor of the Bangladesh Bank.
He said the capital base of the banks facing this shortfall would erode significantly as they must keep provision as per the central bank rules.
Bad loans in the banking sector are ballooning, and the volume of stress loans crossed Tk1 lakh crore at the end of September.
Provision is a fund put aside by a bank or non-bank financial institution to cover an anticipated loss in the future.
As per the central bank guidelines, banks have to keep 0.5-5 per cent of their operating profit as provision against general category loans, 20 per cent against classified loans of substandard category, 50 per cent against classified loans of doubtful category, and 100 per cent against classified loans of bad or loss category.
The banking sector’s overall provision shortfall stood at Tk 6,204.78 crore at the end of September, with some banks having surplus provision. Three months earlier, it was Tk 5,583 crore.
