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The Bangladesh Bank has asked 11 banks, which have suffered capital shortfalls in the first half of 2021, to submit their respective plans for mitigating their capital shortfalls.
The central bank issued letters to the banks asking them to explain what steps they had already been taken or would take to mitigate their shortfalls.
The banks which were asked to submit their plans are Bangladesh Krishi Bank, Sonali Bank, Janata Bank, Agrani Bank, ICB Islamic Bank, BASIC Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, Rupali Bank, Padma Bank and AB Bank.
At the end of June 30, 2021, capital shortfall in BKB was Tk 11,843.97 crore, that in BASIC Bank was Tk 1,927.2 crore, ICB Islamic Bank Tk 1,642.49 crore, BCBL Tk 1,146.21 crore, Padma Bank Tk 461.49 crore, AB Bank Tk 329.52 crore, Sonali Bank Tk 3,557.86 crore, Agrani Bank Tk 1,960.23 crore, RAKUB Tk 1,506.4 crore, Rupali Bank Tk 664.94 crore and Janata Bank Tk 345.04 crore.
Banks are supposed to maintain a minimum 10 per cent CRAR, 3 per cent leverage ratio and 2.5 per cent capital conservation buffer.
In terms of capital to risk weighted assets ratio, ICB Islamic Bank’s performance is the worst with a negative capital adequacy of 136.45 per cent.
CRAR levels are stipulated to protect depositors and maintain confidence in any bank, said a BB official.
If any bank ends up with too many bad loans and wipes them off its balance sheet, it will end up with a negative equity and hence, a negative CRAR which leads a bank to a state of insolvency, the official said.
On the other hand, less than the required CRAR at any bank is also reflective of its weak capacity to pay back depositors’ money, the official said.
Of the banks, state-owned banks only depend on funds from the government to improve their capital base since they have been constantly failing to improve their capital base with their own-funds.
As the government has stopped recapitalising the SoBs, the banks have been failing to strengthen their capital base.
Before suspension of recapitalisation of government-owned banks to meet their capital shortfalls in FY19, the SoBs received around Tk 10,666 crore from the state coffer from FY15 to FY19.
During the period, scam-hit BASIC Bank received the highest amount of bailout funds of Tk 3,390 crore, Sonali Bank received Tk 3,003 crore, Janata Bank Tk 814 crore and Rupali Bank Tk 240 crore.
An official of the central bank said that the capital based of the banks would not improve unless fresh capital was injected and the amount of non-performing loans was brought under control by containing corruption and irregularities.
(NA)
