Kazi Zahidul Hasan :Nine banks, battered by huge risk-weighted assets (RWA), have failed to come up with required funds against their RWA pushing back the country’s banking sector to capital shortfall again, official sources said. As on June 30, this year, the capital shortfall of these banks stood at Tk 1200 crore guiding the banking sector to a combine capital shortfall of about Tk 848 crore, according to Bangladesh Bank (BB).The nine banks, which failed to keep required capital against RWA, are Sonali Bank, Rupali Bank, BASIC Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, Premier Bank and ICB Islami Bank. The National Bank of Pakistan, a foreign bank, was also the list of capital shortfall.In December last, the banks had a combine surplus capital of Tk 3,355 crore. “The country’s banking sector has plunged in capital shortfall again raising concern about the stability of the sector,” BB official told The New Nation yesterday.He added: “The banks, which failed to come up with required capital, are badly managed and the shrinking capital of the banks sparked concerned over their stability and long-term profitability. These banks need to fill the capital hole immediately, otherwise, this will have a potential impact on their lending and future risk aversion”. “The central bank has asked the banks to meet up the capital shortfall immediately to meet regulatory requirement and cover up their bad loans, RWA and losses,” he said. When asked, he said, the shortfall of capital is not an immediate threat to the banking system and the problem is perfectly manageable.According to BB statistics, the capital shortfall of crisis ridden BASIC Bank stood at Tk 1,675 crore as on June, this year, whereas, it was only Tk 647 crore in December last.BASIC Bank is facing a huge capital deficit due to irregularities in distribution of loans over the last several years, said the BB official.Sonali Bank, the largest state-owned commercial bank of the country, was also suffering from acute liquid funds during the period and the capital shortfall of the bank stood at Tk 1,511 crore as of June this year.During the said period, the capital shortfall of Krishi Bank stood at Tk 5,958 crore which was Tk 5,764 crore in December last. As on June 30, this year, the capital shortfall of Rupali Bank was Tk 217 crore, the Rajshahi Krishi Unnayan Bank Tk 650 crore, ICB Islami Bank Tk 1,416 crore, Bangladesh Commerce Bank Tk 40 and Premier Bank Tk 65.29 crore.The capital shortfall of National Bank of Pakistan stood at Tk 370 crore during the said period, shows the BB data. As on June 30, this year, the combine RWA of the banking sector stood at Tk 596,650 crore and the banks were required to set aside Tk 64,522 crore capital against the RWA. “But they had been able to maintain Tk 63,694 crore capital against the RWA, showing a overall capital deficit of Tk 848 crore in the sector,” said the BB data. During the period, the RWA of four state-owned commercial banks stood at Tk 169,23 crore and the banks had to maintain Tk 10,692 crore capital against the RWA. But they had been able to keep Tk 9,251 crore, showing a capital deficit of Tk 1, 442 crore. “The main reason for soaring capital shortfall in the public sector banks is the impact of loan scams,” said former BB governor Dr Salehuddin Ahmed.He said the risk-weighted assets of banks have increased and thus minimum capital requirement of banks shot up as a consequence. “Banks need to be careful in loan sanctioning to avoid high level RWA, which may damage their long-term profitability. The banks should raise their capital not only to rebuild the confidence of the investors but also to comply with the guidelines of the central bank,” he added.He also said recapitalisation of public banks is necessary to bring them back to normal business as their activities are being hampered badly due to capital shortfall.Fresh capital injection is not the only solution. The government should infuse dynamism in their management by appointing efficient and honest people in their boards. Proper oversight and credit risk management policy can be a major component to improve financial health of the public banks.The former BB governor also said that further capital injection must be conditional. “Various conditions including loan recovery targets should be tagged with the fresh capital,” he said, adding, “There must be a provision for punishment for failure to reach the target. The punishment would be applicable to the management, with their non-salary benefits like bonus curtailed”.The BB data also shows, the classified loan of the banking sector stood at Tk 51,334 crore by the end on June 30, a rise of about Tk 10,761 crore from December last year.
