Photo: Collected
Seven public and private sector banks have failed to provision the minimum amounts against default loans. They couldn’t maintain the necessary security reserve against loans. As of the end of December, the deficit of these banks stood at Tk 24,189 crore. Stakeholders say that the origin of this crisis is due to the lack of strong corporate governance and the foundation of the banking business. This information has been revealed in the report of Bangladesh Bank.
According to the information from the central bank, the total provision deficit of seven banks, both public and private, amounts to Tk 24,189 crore. However, due to some banks having a provision surplus, the overall provision deficit in the country's banking sector stands at Tk 11,698 crore. Last September, the overall provision deficit of the banking sector was Tk 25,271 crore. This means that in just three months, the provision deficit has been reduced by about Tk 14,000 crore.
As per norms, banks are required to keep 0.5 to 5 percent of their operating profit as a provision against general category loans, 20 percent against bad loans, and 50 percent against doubtful bad loans. Besides, each bank is required to set aside 100 percent provisioning against defaulted loans in the bad or loss category. A provision deficit is an ominous signal for the banking sector, as it reflects the weak financial position of banks, largely resulting from high non-performing loans.
According to the data, as of the end of December 2023, the private sector National Bank has the largest provision deficit in the country's banking sector. This bank is much talked about due to various corruption and irregularities. Therefore, they are lagging in collecting deposits and extending loans compared to others. As of the end of December, the bank's total defaulted loans stood at Tk 11,698 crore. Against defaults and other loans, the bank required a provision of Tk 13,582 crore. However, the bank has managed to keep only Tk 1,884 crore.
Second on the deficit list is the state-owned special sector Basic Bank. In December, the bank's provision deficit stood at Tk 5,195 crore. Another state-owned bank, Agrani Bank, is in the third position, with the deficit standing at Tk 4,340 crore at that time. The provision deficit of state-owned Rupali Bank is Tk 2,273 crore. Additionally, the provision deficits of Bangladesh Commerce Bank, Standard Bank, and Probashi Kallyan Bank are Tk 385 crore, Tk 231 crore, and Tk 67 crore, respectively.
When asked about this, the managing director and chief executive of a private bank told The Daily Messenger on condition of anonymity, “If you look at the banks with provision deficits, you will see that these banks have been experiencing various problems for a long time. Their defaulted loans have been high for an extended period. Many of their resources are at risk. The condition of these banks is not good in the stock market either. The role of Bangladesh Bank is not satisfactory regarding the fact that they have been experiencing high defaults and provision deficits for an extended period. The condition of these banks has not changed due to the lack of supervision from the central bank.”
In this regard, former caretaker government advisor AB Mirza Azizul Islam told The Daily Messenger, “Banks are failing to collect their disbursed loans. For this, additional provision has to be kept. Besides, bad loans from banks are increasing day by day. 100 percent provision has to be kept for these loans. Due to the financial crisis in the country, there is not much growth in deposits at present. Additionally, there is a liquidity crisis in banks. Because of this, perhaps the banks are not able to save the provision.”
A chief executive of a bank with a provision deficit told The Daily Messenger on condition of anonymity, “Our bank has been in trouble for a long time. We are trying to overcome those problems. If you notice, you will see that our provision deficit has decreased in this quarter compared to the previous quarter.”
According to the data of the central bank, as of the end of December 2023, the banks of the country have disbursed total loans of Tk 16,176.89 crore. Out of this, Tk 1,456.33 crore has become defaults, which is 9 percent of the total disbursed loans. As of the end of last September, the total disbursed loans of the country's banking sector stood at Tk 15,651.95 crore. Out of this, Tk 1,553.97 crore has become defaulted loans. This was 9.93 percent of the total disbursed loans. That is, the defaults in the banking sector of the country have decreased by Tk 9,764 crore in three months. This is Tk 24,977 crore more than the same period last year (December 2022). At the end of December last year, the amount of defaulted loans was Tk 12,065.6 crore.
According to the data of Bangladesh Bank, state-owned banks have disbursed loans of Tk 3,134.04 crore until last December. Out of this, Tk 65,781 crore has defaulted, which is 21 percent of the total loan. Private banks disbursed loans of Tk 11,969.44 crore during the same period. Out of this, the default is Tk 70,982 crore, which is 5.93 percent of the total loan. Foreign banks have disbursed loans of Tk 66,455 crore until December. Out of this, the default is Tk 3,201 crore, 4.82 percent of the total loan. Additionally, specialized banks have disbursed loans of Tk 40,884 crore. Out of which Tk 5,669 crore has defaulted. This is 13.87 percent of disbursed loans.
Messenger/Disha
