Eight banks, including three state-owned ones, have faced a provision shortfall of Tk 26,134 crore until June this year, showing their worsening financial health caused by a lack of good governance and massive loan irregularities.
The provision shortfall of these banks was Tk 20,159 crore at the end of March this year.
They are Agrani Bank, BASIC Bank, Rupali Bank, National Bank, Dhaka Bank, Bangladesh Commerce Bank, Standard Bank and NCC Bank, according to Bangladesh Bank (BB).
Sources at the Bangladesh Bank said the three state-owned banks suffered the provision shortfall of Tk 12,871 crore while the figure was Tk 13,260 crore for private banks, including a foreign bank.
The provision shortfall of BASIC Bank was Tk 4,310 crore, followed by Agrani Bank Tk 4,464 crore, Rupali Bank Tk 4,097 crore, National Bank Tk 11,683 crore, Dhaka Bank Tk 439 crore, Bangladesh Commerce Bank Tk 516 crore, Standard Chartered Bank Tk 203 crore and NCC Bank Tk 419 crore.
Experts say that the provisioning shortfall is likely to be more than Tk 50,000 crore in the state-owned and private banks.
Banks have to keep 0.5-5 per cent of their operating profits as provisions against general category loans, 20 per cent against classified loans of substandard category, and 50 per cent against classified loans of doubtful category.
The lenders also have to set aside 100 per cent provisioning against classified loans of bad or loss category.
Non-performing loans (NPLs) in Bangladesh rose to Tk 1,56,039 crore at the end of June this year, which was a staggering 10.11 per cent of the banking sector’s outstanding loans of Tk 15,42,655 crore.
NPLs accounted for 8.16 per cent of the total outstanding loans at the end of December 2022, which later increased to 8.8 per cent in March this year, BB sources said.
The country’s default loans reached Tk 131,621 crore in the January-March quarter of 2023. So, NPLs in the next quarter rose by Tk 24,418 crore.
Executive Director at Policy Research Institute of Bangladesh Ahsan H Mansur said, "The provision shortfall in the banks means that they are distributing profits and dividends to their shareholders without protecting the interests of depositors."
He said high-default loans were mainly responsible for the provisioning shortfall in the banks.
"In the past, the majority of the eight banks faced a wide range of scams. As a result, their default loans have ballooned," said Mansur, also a former official of International Monetary Fund.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, says that banks should keep required provisions to mitigate credit risks.
"The banks facing the provision shortfall usually show profits and provide dividends. This is not logical. This poses the risk to depositors."
