Eight banks face provision shortfall of Tk19,833cr

Eight scheduled banks, including four state-owned ones, had a Tk19, 833 crore provision shortfall at the end of September this year, which indicates their ailing financial health caused mainly by growing bad loans.

The banks are Agrani Bank, BASIC Bank, Janata Bank, Rupali Bank, Bangladesh Commerce Bank, Mutual Trust Bank, National Bank and Standard Bank.

Of them, National Bank had the highest provision shortfall of Tk7, 474 crore due to its growing non-performing loans. Its non-performing loans at the time stood at Tk11, 336 crore, the highest among private banks.

The provision shortfall was Tk3, 521 crore at the state-run Agrani Bank, Tk4, 562 crore at BASIC Bank, Tk599 crore at Janata Bank and Tk3014 crore at Rupali Bank.

Besides, the provision shortfall was Tk345 crore at Bangladesh Commerce Bank, Tk171 crore at Mutual Trust Bank and Tk146.77 crore at Standard Bank.

Industry insiders said high non-performing loans (NPL) in the banking sector were largely responsible for the provision shortfall in these banks.

The latest data of the Bangladesh Bank has revealed that the country’s NPLs stood at Tk1, 34,396 crore until the end of September this year, a significant year-on-year increase of 32.86 percent.

The September’s figure was the highest since Bangladesh’s independence

in 1971. Former governor of the Bangladesh Bank Salehuddin Ahmed said provision shortfall is a bad sign for a bank as it reflects its weak financial health.

The capital base of the eight banks will erode significantly as they must keep provisioning as per the central bank rules, he added.

The overall provision shortfall in the banking sector stood at Tk13, 529 crore at the end of September as some banks had a surplus provisions, shows the Bangladesh Bank data.

Banks have to keep 0.5 percent to 5 percent of their operating profits as a provision against general category loans, 20 percent against classified loans of substandard category, 50 percent against classified loans of doubtful category and 100 percent against classified loans of bad or loss category.