9 banks record Tk18,932cr provision shortfall in June

Nine scheduled banks, including four state-owned ones, had a Tk 18,932.35 crore provision shortfall at the end of June 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, Southeast Bank, and Standard Bank.

Of them, National Bank had the highest provision shortfall, which was Tk 7,115.9 crore, due to its growing non-performing loans. Its non-performing loans at the time stood at Tk 9,394.2 crore, the highest among private banks.

The provision shortfall was Tk 2,973.22 crore at the state-run Agrani Bank, Tk 4,441.54 crore at BASIC Bank, Tk 640.5 crore at Janata Bank, and Tk 2,962.1 crore at Rupali Bank.

Besides, the provision shortfall was Tk 343.82 crore at Bangladesh Commerce Bank, Tk 213.94 crore at Mutual Trust Bank, Tk 102.96 crore at Southeast Bank, and Tk 138.37 crore at Standard Bank.

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

At the end of June, non-performing loans in the banking sector stood at Tk 1,25,257.57 crore, which was 8.96 per cent of the total disbursed loans, as per the Bangladesh Bank data.

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 nine banks would 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 Tk 13,220 crore at the end of June as some banks had a surplus provision, shows the Bangladesh Bank data.

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