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The banking sector faced a combined provision shortfall of Tk 22,573 crore at the end of December last year, exposing their faltering financial health.
The shortfall at four state-owned banks stood at Tk 18,428 crore while it was Tk 4,145 crore at five private ones.
The banks are Agrani Bank, Rupali Bank, BASIC Bank, Janata Bank, Bangladesh Commerce Bank (BCB), Mutual Trust Bank, National Bank, Standard Bank, and International Finance Investment and Commerce Bank (IFIC).
Some of the banks faced a provision shortfall allegedly because they had lent a large amount of money in violation of banking regulations.
According to experts, the rising trend of non-performing loans in the banking sector is largely responsible for the huge provision shortfall.
Mohammad Shams-Ul Islam, chief executive officer and managing director of Agrani Bank, told The Business Post provision increases when default loans rise.
He said provision shortfall had increased due to the rise in default loans in December 2021 compared to the same month the year before.
“The government has given facilities in repaying loans considering the pandemic impacts, but many good borrowers have not paid back.”
However, he said the economy was recovering and the situation would improve in the coming days.
At the end of December 2020, default loans stood at Tk 88,780 crore, which rose to Tk 1,03,274 crore a year later.
The central bank data shows Janata Bank’s provision shortfall was the highest, Tk 10,491 crore, at the end of December 2021. Besides, BASIC Bank’s shortfall stood at Tk 4,115 crore, Agrani Bank’s at Tk 2,618 crore, and Rupali Bank’s at Tk 1,203 crore.
Non-performing loans at these banks stood at Tk 33,016 crore, including bad loans of Tk 31,007 crore, during this period.
On the other hand, the five private commercial banks’ provision shortfall was Tk 4,145.37 crore at the end of December 2021. During this period, their non-performing loans stood at Tk 11,071 crore while bad loans amounted to Tk 9,652 crore. National Bank had the highest provision shortfall of Tk 3,262.62 crore, up from Tk 435.38 crore in the same period of 2020. The provision shortfall was Tk 316.18 crore at BCB, Tk 212.47 crore at IFIC, Tk 205.1 crore at Mutual Trust, and Tk 149 crore at Standard Bank.
As per the regulations, banks have to keep 0.5-5 per cent provision in the Bangladesh Bank against default loans of general category, 20 per cent against classified loans of sub-standard category, 50 per cent against classified loans of doubtful category, and 100 per cent against classified loans of bad or loss category.
