Business Desk :
Eleven commercial banks had a deficit of about Tk15,000 crore in provisions or security reserves at the end of last June, according to the Bangladesh Bank.
Of them, state-run Janata Bank, BASIC Bank, Agrani Bank and Rupali Bank bore the lion’s share of the deficit. They failed to maintain enough loan loss provisioning against bad loans in the second quarter of the year.
At the end of March, the 11 banks had a shortage of more than Tk12,649 crore in loan provisioning.
Among the private banks, Bangladesh Commerce Bank, Dhaka Bank, Mutual Trust Bank, National Bank, Social Islami Bank, Standard Bank and specialized Bangladesh Krishi Bank are the ones that had a shortage of provisions.
People in the sector say loan repayment is still flexible due to the ongoing third wave of the pandemic. Bad and default loans have been rising in consequence but banks are unable to keep enough security reserves against them.
Loans disbursed by banks are mostly depositors’ money and the provision of security reserves is meant to keep depositors from any risks, the BB said.
Insiders say loan recovery is poor because of the disbursement of credits without scrutiny. Moreover, flexible provisions have created an environment encouraging borrowers to not pay back loans.
The failure to keep enough provisioning may lead to a shortage of capital.
According to the central bank, loans disbursed until March this year amounted to a little over Tk12,13164 crore. Of the amount, default loans made up 8% of the total loans to Tk99,205 crore.
Since December last year, default loans increased by more than Tk10,000 crore.
Of the shortage of loan provisioning, four government banks alone had a deficit of Tk11,494 crore. Janata Bank had the highest deficit.
By June end, Janata’s deficit stood at Tk5,351 crore, followed by BASIC Bank (Tk3,671 crore), Agrani Bank (Tk1,526 crore) and Rupali Bank (Tk943 crore).
Among the private banks, Nation Bank had the highest deficit of security reserves – Tk2,393 crore.
The BB in a report said a few banks had kept provisions more than what was required, and the total provisions kept until June amounted to around Tk65,000 crore against the need for Tk71,000 crore.
Banks must keep provisions at the rate of 0.25-5% of regular loans, as per the banking rules. The rate has been kept minimum at 0.25% for loans provided to small and medium enterprises.
For sub-standard loans it is 20%, for suspicious debts it is 50% and for bad loans it is 100%.
Loan provisioning is made with money from the bank’s income. If default loans rise but income does not grow much, that leads to a gap.
As per the Bank Company Act, if a bank has a deficit of security reserves, it cannot declare any dividend to shareholders.
