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Eleven banks have been suffering from a capital shortfall of Tk 27,914 crore in the third quarter of 2021, exposing their worsening financial health.
The banks are Agrani Bank, BASIC Bank, Rupali Bank, Janata Bank, Sonali Bank, AB Bank, Bangladesh Commerce Bank, ICB Islamic Bank, Padma Bank, Rajshahi Krishi Unnayan Bank and Bangladesh Krishi Bank (BKB).
BKB has the highest capital shortfall of Tk 12,144 crore as of September this year.
“The bank mainly provides low-interest loans to the marginal farmers,” said former BKB Managing Director Ali Hossain Prodhania.
“The operational cost of the small loans is much higher than any other loans. As a result, the bank has been continuously facing losses,” he said.
Experts said foreign investors usually monitor the ratio of required capital and default loans of banks before investing in any country.
A low capital adequacy ratio discourages them from investing, they said adding that by any standard, a bank’s capital shortfall is considered a grave concern because the problem weakens bank’s resilience.
Banks with capital shortfall fail to operate with efficiency, resulting in rise in operating cost and fall in profitability, they said.
“Capital base in the overall banking sector was not bad.
Still, the state-run banks and some new banks’ capital base was not good owing to their high volume of non-performing loans,” said Zahid Hussain, former lead economist of the World Bank’s Dhaka office.
The banking sector in Bangladesh has maintained the lowest capital adequacy ratio than other South Asian countries- India, Pakistan and Sri Lanka, according to the Bangladesh Bank’s Financial Stability Report, 2020.
