Home ›› 28 May 2023 ›› Front
In the next budget for the fiscal year 2023-24, the government is going to set aside Tk 1,000 crore for state-owned commercial banks to meet their capital shortfall even though it did not release any funds for them in last four fiscal years.
As part of its recapitalisation fund, the government is continuing allocating budget in the name of meeting the bank’s capital shortfall. But despite the allocation, the finance ministry has not been financing the banks for almost four years.
In the next budget, around Tk 1,000 crore is being allocated as recapitalisation of the state-owned banks. However, it is apprehended that this amount may not be released this year too. The officials of the Ministry of Finance are terming this process as a ‘dead case’.
According to sources in the Ministry of Finance, allocation is being kept every year for the banks’ recapitalisation. But this amount is being released only to repay interest on loans of sick industries.
However, Finance Minister AHM Mustafa Kamal has taken a policy decision not to recapitalise banks after taking office. As a result, the ministry has not been releasing any funds for meeting bank capital shortfall since FY19-20.
In the budget speech of FY 22-23, Finance Minister AHM Mustafa Kamal made it clear that there is no plan to provide any further assistance to state-owned banks to replenish the capital shortfall. Several steps have already been taken to stop this culture. He then said that the trend in providing public tax money as capital for state-owned banks has been continuing in Bangladesh for long. However, the government has no plans to repeat such incidents. Instead, the government is encouraging the state-owned banks to adjust their business model and operate accordingly, said the finance minister.
It has been learnt that all the money allocated to the sector is being provided with people’s tax. The International Monetary Fund (IMF) and economists have opposed such allocations to this sector. They argued that the government banks lack good governance but the money flows. Banks are being weakened by bad borrowers. They do not pay back the loan. Profitable management is possible by taking steps in this regard, they said.
To save the banks, the government has a negative view on meeting the liabilities with the people’s tax money, according to sources in the ministry.
Every financial year since 2009-10, some allocation is being kept to meet the capital shortfall of the state-run banks. But most of the time, more amount is needed.
According to the government budget documents and data from Finance Division, around Tk 1,000 crore was pumped into the state-owned banks in FY 2009-10 for recapitalisation while some Tk 1,050 crore was given in the next financial.
Similarly, Tk 700 crore was allocated in FY2011-12, in FY 2012-13 the amount was Tk 420 crore, in FY 2013-14 it was Tk 5,068 crore, in 2014-15 some Tk 2,617 crore was allocated, in FY 2015-16 the amount was Tk 1,800 crore, in 2016-17 some Tk 2,000 crore was allocated at the same rate.
In the FY 2018-19, the allocation for this sector was Tk 1,500 crore and every year thereafter Tk 1,000 to 1,500 crore were allocated. From FY 2018-19, instead of capital replenishment, the Finance Department has been allocated to the “Recurrent Transfers, Not Elsewhere Classified” sector. Tk 1,000 crore is being allocated for this sector in the next financial year as well.
According to the Finance Department, the government has given around Tk 13,000 crore to the banks in various ways including capital replenishment, interest and subsidy during the period from FY2012-13 to FY2018-19. Most of which was allocated to Basic Bank. Sonali Bank is in the second position in terms of capital replenishment.
At the end of December last year, the total capital deficit of five state-owned banks--Sonali, Rupali, Agrani, Janata and Basic, was Tk 11,482 crore. Among the six banks, only BDBL has a surplus of Tk 636 crore. Banks have sought Tk 24,711 crore from the government to meet the capital shortfall in FY2018-19. In the same financial year, the allocation for this sector was Tk 1,500 crore. After that, the ministry did not release the money despite the demands of the banks. For this reason, banks did inform the ministry for releasing money for the last two years. The demand was last sent in FY2020-21.
When this correspondent tried to learn why money was not released to meet the capital shortfall despite keeping the allocation provision, it was known that the interest of the bank loans of the distressed industries were included.
Many of the industrial establishments that were established before 1990 fell into a weak state. In 1998-99, the Munsafe Committee, constituted by the government to address their bank loans, listed 131 private firms in various sectors, including textiles and clothing, as distressed industries.
After this, the Ministry of Industries listed private sector distressed companies. To keep those industries sustainable, the government made a rule that interest would not increase further after it becomes doubled.
Later, these poor companies were given the opportunity to repay part of the principal and interest in simple installments. In this case, the government is paying 5 per cent interest. Some of these institutions did not avail the facility at that time due to which they sought complete waiver. Some organizations are now taking advantage of them. Again, the government is giving benefits to the seek industries. The money earmarked for this is now being exempted only on interest payments.
In last October too, the non-textile industries were given an option of a one-time payment of 2.5 per cent as down payment to come out of the debt cycle. In a circular, the central bank facilitated to conditionally write off outstanding loan accounts of over Tk 50 lakh principal of distressed industries which are not related to the garment sector.
Bangladesh Bank has made an “exit policy” offering a minimum one-time payment of 2.5 per cent and the remaining amount to be paid in installments within a maximum period of three years.
Bangladesh Bank provided this facility for companies other than textile listed with the Ministry of Industries.
