Staff Reporter :
Badly hit by scandals and toxic loans, six banks now run with an alarming provision shortfall.
Of them, three are public banks-Sonali, Rupali and BASIC, and three private banks-Bangladesh Commerce Bank, National Bank and Premier Bank.
Their cumulative provision shortfall stood at Tk 8,534.crore as on June 2017, Bangladesh Bank data showed.
“Provision shortfall, especially at the public banks, has already reached an alarming level requiring immediate policy response in line with global practice. Otherwise, it would jeopardize their financial stability and harm profitability,” a BB official told The New Nation on Monday.
He said loan scams and high default loans contributed to their soaring provisioning shortafll.
“We have asked the banks to maintain required provision to cover up their bad loans,” the central bank official further said.
At the end of June, the total default loans at public banks stood at Tk 74,148 crore, according to the central bank.
Among the public banks, the scam-hit BASIC Bank ran with Tk 3,080 crore provision shortfall, followed by Sonali’s Tk 2,809 crore and Rupali’s Tk 1,473 crore as on June 30 this year.
Of the private banks, National Bank ran with Tk 726.88 crore provision shortfall, followed by Bangladesh Commerce Bank’s Tk 269 crore and Premier Bank’s Tk 175 crore, according to BB data.
When contacted, Sonali Bank Managing Director Obayed Ullah Al Masud
claimed that the BB figure showed an inflated provision shortfall at Sonali Bank. Although the bank’s provision shortfall came down to Tk 1,500 crore, the BB shows Tk 2,800 crore shortfall. “It’s a miscalculation,” he added.
“These banks have failed to meet up their required provisioning due to rise in their bad loans. Besides, they have underestimated the potential losses incurred from various businesses and assets, causing shortfall in their required provisioning,” former Bangladesh Bank governor Dr Sahehuddin Ahmed told The New Nation.
According to him, banks have to keep 0.25 to 5.0 per cent as provisioning against unclassified loans, 20 per cent provision against sub-standard (SMA) loans, 50 per cent against doubtful loans and 100 per cent against Non-Performing Loans (NPLs).
Dr Ahmed suggested that banks must boost capital and set aside the required provision against stressed assets or loans to avert future shock and to ensure their sound financial health as well.
