Though six months have elapsed, Farmers’ Bank has been unable to return clients’ deposits; a dozen other banks are also in a precarious position.
Reportedly, nine banks are cashing their capital to survive. Another one dozen commercial banks face deficit in security deposits.
According to Bangladesh Bank March report, the deficit stands at Tk. 10,596 crore. The Bangladesh Bank report also reveals that if 10 leading clients of a bank become defaulters, then 38 banks will face capital shortage.
The Bangladesh Bank, 2017 financial stability report, says that under the current circumstances, if 7 clients become defaulters then there will be capital crisis in 34 banks. If three more become defaulters, then 19 banks will face capital crisis.
Banks need to reserve capital, assessing the risks; at present, the total risk of a bank is 10 per cent or, Tk 400 crore.
Bank related economists say: “failing to keep security reserve, banks are eating up their own capital.”
According to Bangladesh Bank, 2017 report, capital deficit of nine banks stand at Tk. 19,467 crore.
The biggest deficit is faced by Bangladesh Krishi Bank with Tk. 7,776 crore 63 lakh.
They are followed by Sonali bank at Tk. 5,397 crore 29 lakh. The others are:
BASIC Bank: Tk. 2,656 crore 38 lakh, Rajshahi Krishi unnayan Bank: Tk. 813 crore 34 lakh, Rupali Bank: Tk. 637 crore 62 lakh and Janata Bank: Tk. 161 crore 48 lakh.
Capital deficit in private sector banks: ICB Islami Bank: Tk. 1,495 crore 45 lakh, Farmers’ Bank: Tk. 282 crore 89 lakh and Farmers’ Bank: Tk. 245 crore 52 lakh.
In this regard, former governor of Bangladesh Bank, Dr. Salehuddin Ahmed, told the Bangla Tribune: “banking sector had been engulfed in irregularities and corruption for several years; influential people are taking money from banks and are not returning it.”
As a result, loan defaulting is seeing a rise; due to the increase of default loan, provision deficit is increasing; to meet that deficit, banks are reaching for their main capital.
Every year, government banks get their capital from taxes paid by the public.
The government initiative to inject capital has no rational basis, he observed.
“This is tantamount to encouraging inefficiency, mismanagement and corruption at state owned banks.”
Expressing the same opinion, former deputy governor of Bangladesh Bank, Ibrahim Khaled, told Bangla Tribune: “due to lack of good governance, banks will face risk; under political pressure, some unscrupulous people, who have taken loans are turning defaulters.”
This harmful culture is now noticed in private banks too, he deplored.
Consequently, default loan is rising and deficit in provision becomes inevitable. Bangladesh Bank also says that banks are required to keep security deposit against defaulted loans, but due to rise in defaulted loans, 12 banks are failing to keep security deposits.
As per latest reports: the provision deficit of 12 banks at the end of March, 2018, stands at Tk 10, 596 crore.
The figures are: Sonali Bank: Tk 3,949 crore, Basic bankL Tk 3,307 crore, Rupali Bank: Tk 1,268 crore, AB Bank: Tk155 crore, IFIC Bank: Tk 29 crore 41 lakh, Mutual Trust bank: Tk 114 crore, National Bank: Tk 140 crore, Premier Bank: Tk 120 crore, Standard Bank: Tk 68 crore.