New Nation on Friday reported that the state-owned commercial banks’ capital fell by around 9 percent in the second quarter of this year (April to June) compared to the first quarter and stood at Tk 10,916 crore and a rise in defaulted loans has been blamed for it. In line with international standards, banks have to maintain a capital adequacy ratio (CAR) of 10 percent against their risk-weighted assets. Central Bank statistics showed that capital position deteriorated mainly in Sonali, Rupali, BASIC Banks, in addition to Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank. The shrinking of the capital base of the state-owned banks has brought down the overall banking sector capital to 1.36 percent though many, except three private banks gained the required capital adequacy standard. It is advisable that the Central Bank and the government must impose regulations in the public banks to regain the capital adequacy level as the leaders of the country’s banking sector. The public banks have a cumulative capital shortfall of such huge proportion is highly critical for their long-term sustenance. Low-book valuations alongside poor asset quality and earnings and large scale swindling and financial irregularities have caused the run to their capital base. At the end of June, Sonali Bank’s capital shortfall hits the highest. Rupali Bank and Janata Bank’s shortfall appear at a lower level. But the scam-hit BASIC Bank’s shortfall stands at Tk 2,916 crore. Moreover, Bangladesh Krishi Bank capital shortfall skyrocketed at Tk 6,607 crore followed by Tk 494 crore shortfall at Rajshahi Krishi Unnayan Bank.Three private banks such as ICB Islami Bank, Commerce Bank and Premier Bank were also running with substantial capital shortfall as on June this year. The government plans to inject Tk 5,000 crore as recapitalization of public banks. But this figure is not enough, even if fully reimbursed, to overcome the gap. So injecting capital again and again to keep these banks functional and in the process to reward the loan defaulters and swindlers can’t be the reasonable way to keep those banks functioning. Capital shortfall is badly affecting these banks leading business exposing them to future financial vulnerability. Two agriculture-based banks fell in capital inadequacy as flood-hit farmers across the country failed to repay banks installments although they have also lost bigger part of their fund to swindlers. But the problems of the state-owned banks are mainly aggravating from repeated rescheduling of big loans owned by big corporate business houses. They hold immense power to realize any concessions. But such whimsical decision of the banks as authorized by Bangladesh Bank is only destroying the foundation of the state-owned banks.We must have a clear choice whether political overture must dominate the state-owned banks which brings greater crisis to them or business conscious policies must dominate them to over come the crisis. We can’t allow public deposits to fall into the hands of people who don’t repay loans.
