The overall shortfall in provision against general and defaulted loans in the banking sector increased by Tk 2,174.59 crore or 843.74 per cent in the first quarter of this year with seven banks failing to keep required provision in the period. According to the latest BB data, the shortfall rose to Tk 2,432.32 crore as of March 31, 2014 from Tk 257.73 crore as of December 31, 2013. The provision shortfall in the banking sector stood at Tk 3,281.74 crore as of September 30, 2013.
The seven banks which failed to keep required provision against loans are Rupali Bank, Bangladesh Commerce Bank, National Bank, Shahjalal Islami Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and BASIC Bank.
A BB official told New Age on Monday that the provision shortfall in the banking sector had declined in the last quarter of 2013 as the banks regularised huge amount of defaulted loans by using the central bank’s relaxed policy on the ground of pre-polls political unrest.
Former BB deputy governor Khondker Ibrahim Khaled told New Age that the banks had showed significant amount of net profit at the end of 2013 as they were not required to keep big amount of provision against the rescheduled loans.
As per BB regulations, banks have to keep 0.50 per cent to 5 per cent provision against general category loan, 20 per cent provision against classified loans of sub-standard category, 50 per cent against classified loans of doubtful category and 100 per cent against classified loans of bad or loss category.
Ibrahim said, ‘Directors of the scheduled banks had gained huge profit by rescheduling the defaulted loans in the last quarter of 2013. The relaxed rescheduled policy opened a scope for the banks’ directors to gain profit. The policy did not bring any positive impact on the banking sector’.
The BB should have avoided the relaxed rescheduled policy as such type of stance further increased the defaulted loans in the banking sector, he said.
The BB data showed that defaulted loans had increased by Tk 7,589.15 crore to Tk 48,172.16 crore as of March 31, 2014 from Tk 40,583.01 crore as of December 31, 2013.
The provision shortfall in the state-owned commercial banks increased to Tk 34.14 crore as of March 31, 2014 from a surplus amount of Tk 1,454.23 crore as of December 31, 2013, and that in the specialised banks to Tk 2,627.73 crore from Tk 2,083.63 crore.
The private and the foreign commercial banks, however, posted a surplus amount in keeping provision, but
their surplus figure decreased significantly in the first quarter of 2014.
The provision surplus in the PCBs decreased to Tk 181.33 crore as of March 31, 2014 from Tk 301.82 crore as of December 31, 2013, and that of the FCBs to Tk 48.22 crore from Tk 69.86 crore.
The provision shortfall of Rupali Bank stood at Tk 319.92 crore as of March 31, 2014, that in BCBL at Tk 12.08 crore, that in National Bank at Tk 15.11 crore, that in Shahjalal Islami Bank at Tk 98.73 crore, that in BKB at Tk 1,691 crore, that in RAKUB at Tk 297.80 crore and that in BASIC Bank at Tk 658.72 crore.
Banks usually keep required provision against their general and defaulted loans from their operating profits in a bid to mitigate financial risks, another BB official said.
Banks sanction and disburse loans to their clients from the depositors’ fund, so they (banks) have to keep the provision for the interest of their depositors, he said.
The BB will soon give the banks directions to keep the required provision against their general and the defaulted loans, the official said.
-With New Age input
