Banks face Tk9,523cr provision shortfall

Of the 15 banks, four are state-owned, while the remaining eleven are private commercial banks, according to data from the Bangladesh Bank.

The fifteen banks are: Sonali Bank, Agrani Bank, Rupali Bank, BASIC Bank, AB Bank, Bangladesh Commerce Bank, Dhaka Bank, Mutual Trust Bank, National Bank, Premier Bank, Shahjalal Islami Bank, Social Islami Bank, Standard Bank, Southeast Bank, and Trust Bank. 

Some of the banks are face provisioning shortfall because they lent a large amount of funds in violation of banking regulations. 

According to experts, the rising trend of default loans is largely responsible for the provisioning shortfall. 

According to central bank data, the Agrani Bank shortfall stood at Tk593 crore, BASIC Bank at Tk3,368 crore, Rupali Bank at Tk834 crore, Sonali Bank at Tk3,088 crore, AB Bank at Tk112 crore, Bangladesh Commerce Bank at Tk277 crore, Mutual Trust Bank at Tk85 crore, Dhaka Bank at Tk309 crore, National Bank at Tk190 crore, Premier Bank at Tk34 crore, Shahjalal Islami Bank at Tk97 crore, Social Islami Bank at Tk220 crore, Standard Bank at Tk23 crore, Southeast Bank at Tk23 crore, and Trust Bank’s provisioning deficit stood at Tk270 crore. 

As per central bank regulations, banks have to keep 0.50% to 5% provision against general category loans, 20% against classified loans of sub-standard category, 50% against classified loans of doubtful category, and 100% against classified loans of bad or loss category.

The capital base of the 15 banks will erode significantly if they keep provisioning as per the central bank rules, said a Bangladesh Bank official.

Former central bank deputy governor, Khondker Ibrahim Khaled, said the banks have to keep the required provisions from their operating profits, so they will "raise their lending rates in the upcoming days to ensure they make profits."

The non-performing loans (NPLs) of banks rose by Tk 19,608cr in December 2018, compared to the same period in 2017. The amount stood at Tk 93,911.40 crore or 10.30% of total disbursed loans as of December 2018. 

Former Bangladesh Bank governor Salehuddin Ahmed said it is the prime responsibility of banks to justify the eligibility of a company that applies for a loan, as well as its capacity to repay. 

“But this is absent in loan approval as corrupt bankers sometimes give loans violating regulations,” he added.