10 banks face Tk 34,640cr capital shortfall

Ten scheduled banks, including seven from the public sector, faced a combined capital shortfall of Tk 34,640 crore in the last quarter of 2021, exposing their worsening financial health.

The banks are – Agrani Bank, BASIC Bank, Rupali Bank, Janata Bank, Sonali Bank, Bangladesh Commerce Bank, ICB Islamic Bank, National Bank, Rajshahi Krishi Unnayan Bank (RAKUB), and Bangladesh Krishi Bank. Of them, Bangladesh Krishi Bank had the highest capital shortfall of Tk 12,428.34 crore at the end of December last year, up from Tk 10,819.34 crore a year earlier.

Bangladesh Krishi Bank offered low-interest loans to marginal farmers, said Ali Hossain Prodhania, the bank’s former managing director.

The operational costs of these small loans were significantly higher than those of other loans, Ali also said, adding that this was the reason the bank had been losing money on a regular basis.

Meanwhile, state-run Agrani Bank faced a Tk 3,877.15 crore capital shortfall as of December last year, up from Tk 3,002.20 crore a year earlier.

Contacted, the bank’s Managing Director Md Shams-Ul Islam said that capital shortfall is “like cancer” in state-run banks and it is true that the deficit could not be reduced.

He added, “We are providing 34 government services to the people without any cost. In addition, there are many loans stuck in the government institutions.”

“If we can recover those loans, there would be no capital deficit,” he added.

As of December last year, the capital shortfall of BASIC Bank stood at Tk 2,529.70 crore, Janata Bank at Tk 4,256.12 crore, Rupali Bank at Tk 3,037.77 crore, Sonali Bank at Tk 3,639.19 crore, Bangladesh Commerce Bank at Tk 1,088.19 crore, ICB Islami Bank at Tk 1,661.32 crore, National Bank at Tk 456.95 crore, and RAKUB at Tk 1,665.18 crore, the Bangladesh Bank’s latest data shows.

Experts said that foreign investors usually monitored the ratio of required capital and default loans of banks before investing in any country, adding that a low capital adequacy ratio discouraged them from investing.

“Capital base in the overall banking sector was not bad. Still, the capital base of state-run banks and some new private ones was not good owing to their high amount of non-performing loans,” says Zahid Hussain, former lead economist of the World Bank’s Dhaka office.

The banking sector in Bangladesh has maintained the lowest capital adequacy ratio among other South Asian countries, including India, Pakistan, and Sri Lanka, according to the Bangladesh Bank’s Financial Stability Report 2020.