Fourteen commercial banks faced a shortfall of capital in the third quarter to September last of the current calendar year (CY) mainly due to the higher volume of non-performing loans (NPL), officials said.
"The banks had to maintain more provisions against their default loans which ultimately reduced their retained earnings," a senior official at the Bangladesh Bank (BB) told the FE Thursday elaborating on the capital shortfall of banks.
He also said the volume of NPL increased recently due to the political uncertainty coupled with the new stringent classification guideline of the central bank.
"Higher default loans have led to a rise in risk-weighted assets of the banks, which ultimately prompted the capital shortfall," the central banker noted.
Four state-owned commercial banks (SoCBs), six private commercial banks (PCBs), one foreign commercial bank (FCB) and three development finance institutions (DFIs) were on the list of those witnessing the capital shortfall during the July-September period of the current calendar year.
The amount of classified loans in the country's banking sector reached Tk 567.20 billion at the end of the third quarter, nearly 13 per cent of the total outstanding loans, according to the BB data.
However, the volume of classified loans rose by more than 8.0 per cent or Tk 44.10 billion in the July-September quarter over that of the previous quarter. The figure was Tk 523.09 billion three months back.
The banks were asked to submit plans to the central bank on meeting their capital shortfall by the first week of December 2013, according to BB officials.
"We'll take the next course of action after scrutinising their plans," another BB official said, adding that the central bank would take measures to that end on the case-to-case basis.
The capital adequacy ratio (CAR) of the country's banking sector rose to 9.14 per cent in the third quarter of the current calendar year from 9.12 per cent in the previous three months, according to the central bank statistics.
"We expect that the CAR will cross 10 per cent by the end of this calendar year after injection of fresh funds by the government under the plan of recapitalisation of the SoCBs," the central bank official said.
He further said the finance ministry was now working on injecting Tk 50 billion into four SoCBs aiming to improve their financial health.
The BB fixed the CAR at minimum 10 per cent as part of the preparation for implementing the Basel-III in the banking sector in 2014, the BB official added.
Under the Basel-II, the standard requirement of the CAR is minimum 8.00 per cent.
Bangladesh is now implementing the Basel-II accord to consolidate the capital base of banks in line with the international standard.
It has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.
Three types of risk - credit risk, market risk and operational risk - have to be considered under the minimum capital requirement.
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