CAPITAL shortfall in state owned banks (SoBs) has become chronic forcing them to regularly depend on recapitalization of their working capital from annual budget. As a report in The New Nation on Friday said five state-owned banks have applied for injection of Tk3,497 crore to make up their capital shortfalls during the current fiscal 2015-16 to beef up working capital and maintain the minimum credible global banking standard. Three SoBs — Sonali, Rupali and Janata banks, besides two other specialised banks such as BASIC Bank and Bangladesh Krishi Bank have requested the Finance Ministry for immediate bailout. It is not clear whether this amount is part of the annual budgetary allocation for recapitalization or new demand to handle unusual situation.
As it appears these banks have also placed demand for Tk 4,600 crore for fiscal 2016-17 and Tk 4,854 crore for 2017-18. What it shows is that the SoBs are at severe existential problem and without the budgetary bailout programme they may cease to function normally. At least Sonali and BASIC banks have called for immediare release of the fund to meet their capital inadequacy. But the way they are planning to survive is also highly critical for any banking institution and in case of any big set back its adverse impact on the national economy and particularly on the depositors would be unthinkable.
As per the report, the Finance Ministry has already forwarded notes to senior policy-makers for release of the requested money. Particularly Sonali Bank and BASIC Bank are in very bad shape as the former lost Tk 3,500 crore alone to a single corporate borrower in recent loan scams while the later lost over Tk 4,500 crore to fictitious borrowers. The problems in the SoBs are in fact the government made problems by way of asking banks to sanction loans on political consolations to parties without enough collateral. The government also influences the management of these banks to reschedule repayment of loans causing inadequacy of their capital. The government is also taking huge loans from some of them regularly making the situation worse. It appears that banks remain sound for a few months after releasing fresh fund and then fall back sick again with their coffer running empty.
There is a growing fear that many big corporate borrowers are becoming wilful defaulters taking advantage of political cover and the government may have started subsidising those loans otherwise from tax-payers money. It shows a total mismanagement of the SoBs making them victims of government failure to efficiently run the banking sector on corporate basis. But there must be a change in the outlook. Banks can’t permanently live on bailout money; they must be allowed to operate on competitive basis and the government must create the situation for banks to survive without bailout.
As it appears these banks have also placed demand for Tk 4,600 crore for fiscal 2016-17 and Tk 4,854 crore for 2017-18. What it shows is that the SoBs are at severe existential problem and without the budgetary bailout programme they may cease to function normally. At least Sonali and BASIC banks have called for immediare release of the fund to meet their capital inadequacy. But the way they are planning to survive is also highly critical for any banking institution and in case of any big set back its adverse impact on the national economy and particularly on the depositors would be unthinkable.
As per the report, the Finance Ministry has already forwarded notes to senior policy-makers for release of the requested money. Particularly Sonali Bank and BASIC Bank are in very bad shape as the former lost Tk 3,500 crore alone to a single corporate borrower in recent loan scams while the later lost over Tk 4,500 crore to fictitious borrowers. The problems in the SoBs are in fact the government made problems by way of asking banks to sanction loans on political consolations to parties without enough collateral. The government also influences the management of these banks to reschedule repayment of loans causing inadequacy of their capital. The government is also taking huge loans from some of them regularly making the situation worse. It appears that banks remain sound for a few months after releasing fresh fund and then fall back sick again with their coffer running empty.
There is a growing fear that many big corporate borrowers are becoming wilful defaulters taking advantage of political cover and the government may have started subsidising those loans otherwise from tax-payers money. It shows a total mismanagement of the SoBs making them victims of government failure to efficiently run the banking sector on corporate basis. But there must be a change in the outlook. Banks can’t permanently live on bailout money; they must be allowed to operate on competitive basis and the government must create the situation for banks to survive without bailout.
