Capital shortage, rampant defaulted loans and severe liquidity crisis have taken a severe toll on the country’s banking sector. According to the latest working paper of Bangladesh Bank, the accumulated losses of 22 banks in the country stood at Tk 2,53,938 crore at the end of March this year.
At the same time, the capital of 15 banks has become negative. This alarming picture was presented by Bangladesh Bank at the fourth meeting of the Standing Committee on the Ministry of Finance of the National Parliament recently.
According to Bangladesh Bank, the operating profit of the entire banking sector in the March quarter was Tk 789 crore, but the net loss stood at Tk 8,417 crore. High levels of non-performing loans, required provisions and capital shortages have had a serious negative impact on the earning capacity of the banks. The 22 banks with accumulated losses include state-owned Janata, Agrani, Rupali and Basic Bank; specialized Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank; and 15 private banks, including one foreign bank. The list of private banks includes Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Global Islami Bank, Union Bank, Exim Bank, AB Bank, IFIC Bank, National Bank, Meghna Bank, Padma Bank, Shimanto Bank, The Premier Bank, Bangladesh Commerce Bank and ICB Islamic Bank. In addition, the list includes National Bank of Pakistan as a foreign bank.
At the same time, 40 scheduled banks managed to maintain the minimum capital, but 15 banks’ capital has become negative. As a result, the capital adequacy ratio (CRAR) of the entire banking sector has fallen to negative 3.17 percent. However, if the combined Islamic banks’ finances are calculated, this rate stands at negative 2.05 percent. The capital situation of Sharia-based banks is even more fragile, where their capital adequacy ratio stood at negative 44.77 percent at the end of March. The central bank has warned that this weakness in capital is putting the banks’ ability to absorb losses, provide new loans and protect the interests of ordinary depositors at serious risk.
On the other hand, the burden of non-performing loans in the banking sector is getting heavier day by day. At the end of the June quarter, out of the total loans of 18 lakh 50 thousand 595 crore taka of 61 scheduled banks, the amount of non-performing loans stood at 6 lakh 6 thousand 555 crore taka, which is about 32.78 percent of the total loans. Of this, the default loan rate of state-owned banks is 47.30 percent and the rate of private banks is 30.74 percent. The amount of provision deficit in the entire banking sector, which is the rule to keep aside money to manage possible losses from non-performing loans, has stood at 2 lakh 22 thousand 358 crore taka.
Although there is overall surplus liquidity in the banking sector, it is not evenly distributed. Twelve banks facing severe liquidity crisis have taken emergency loans (demand loans) worth about Tk 85,000 crore from Bangladesh Bank under the ‘Lender of Last Resort’ facility. Among the major banks that have taken emergency liquidity assistance, Islami Bank Bangladesh has taken Tk 17,000 crore, First Security Islami Bank Tk 15,810 crore, Exim Bank Tk 12,100 crore, Social Islami Bank Tk 10,842 crore and National Bank Tk 10,568 crore. In addition, among other banks, The Premier Bank has taken loans of Tk 4,900 crore, AB Bank Tk 4,270 crore and Union Bank Tk 5,421 crore.
The meeting held at the Parliament House also expressed strong anger over the amendment and supervision of the banking sector law. After the meeting, committee member and Jatiya Nagorik Party (NCP) MP Md. Abul Hasnat (Hasnat Abdullah) said that they strongly opposed the proposal to extend the number of members of the same family in the management of banks and the term of directors. He alleged that the process of handing over banks to oligarchs and specific families has started again. At the same time, protests were also expressed against the attempt to increase the default loan period from 90 days to 270 days, because if this is done, the real terrible picture of default loans will be hidden. Finance Minister Amir Khasru Mahmud Chowdhury, who was present at the meeting, assured the committee that he would give a detailed reply on these issues in the next meeting.