Home ›› 30 May 2023 ›› Front
Eight banks, including four private commercial ones, have jointly faced a Tk 20,157 crore provision shortfall until March this year, indicating their worsening financial health due to a lack of good governance and massive loan irregularities.
They are Agrani Bank, BASIC Bank, Rupali Bank, National Bank, Dhaka Bank, Bangladesh Commerce Bank, Standard Bank and Bangladesh Krishi Bank, according to Bangladesh Bank (BB).
Banks have to keep 0.5 to 5 per cent of their operating profit as provisions against general category loans, 20 per cent against classified loans of the substandard category, and 50 per cent against classified loans of the doubtful category.
The lenders also have to set aside 100 per cent provisioning against the classified loans of bad or loss category.
National Bank has the highest provision shortfall in the banking sector. Till March this year, the bank’s provision shortfall stood at Tk 7,468 crore, up from Tk 6,618 crore three months earlier, showed BB data.
The high amount of non-performing loans (NPLs) of the bank is responsible for the high provision shortfall, say industry insiders.
At the end of March, the bank’s NPLs stood at Tk 7,774 crore, up from Tk 6,658 crore three months earlier, as per BB data.
The private bank recently came under the central bank’s close monitoring after huge irregularities surfaced.
BB found that the bank violated credit card-related regulations as it had allowed 11 persons, including its board directors and their family members, to spend a staggering $10.65 million (about Tk 91.4 crore) through credit cards, in a serious breach of rules.
State-run Agrani Bank, BASIC Bank, Rupali Bank and Bangladesh Krishi Bank and private commercial Bangladesh Commerce Bank and Standard Bank have been facing provision shortages for years.
The six banks jointly faced Tk 12,192 crore provision shortfalls until March this year.On the other hand, Dhaka Bank rejoined the list of banks with provision shortfall after a long time with Tk 497 crore in the January-March quarter.
The provision shortfall is a bad sign for a bank as it reflects its weak financial health, said former BB governor Salehuddin Ahmed. He said that the capital base of these eight banks will erode significantly as they must keep provisioning in line with the central bank rules.
However, those banks are taking deferral facilities from the central bank for keeping provisions to show their balance sheets as smart and healthy.
