Tk 150b more sought to meet SoBs\' recap needs in three years

Syful Islam | Published: February 11, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

The Banks and Financial Institutions Division (BFID) has sought an allocation of Tk 150 billion for replenishing capital of state-owned banks (SoBs) in three fiscal years, officials said.
In a letter this week the division requested the finance authorities to make the allocation under a separate head namely "investment in bank recapitalisation" during the period from 2015-16 to 2017-18, they added.
According to a calculation, six state-owned banks need some Tk 140 billion to meet their capital shortage in line with Basel-II requirements. The government kept Tk 50 billion in fiscal budget for the fiscal year (FY) 2015-16 for recapitalisation of banks.
To meet its capital shortfall the Sonali Bank Ltd needs Tk 29.34 billion, Janata Bank Tk 6.63 billion, Rupali Bank Tk 1.46 billion, Basic Bank Tk 30.50 billion, Bangladesh Krishi Bank Tk 66.76 billion, and Rajshahi Krishi Unnayan Bank Tk 5.82 billion.
Earlier, the BFID had sent bank-and year-wise recapitalisation plans to the finance division but did not receive any positive response.
The BFID in the letter said recapitalisation of the state-owned banks is needed to help continue regular operations of the banks.
It sought a separate code number for this special fund and keeping Tk 50 billion each fiscal year as budgetary allocation so that the banks can be given necessary capital support according to their needs.
Earlier at a meeting last year, chief executives of the banks said they were facing daunting problems in running their day-to-day banking operations due to the capital shortage.
They requested the government to provide necessary funds for recapitalisation of the banks so that they could run daily activities smoothly and keep requisite provision with the central bank against their classified loans (CLs).
In fiscal year 2013-14 the government in the first phase had pumped Tk 41 billion into recapitalisation fund for Sonali, Janata, Agrani and Rupali banks. In the second phase BKB, RAKUB, Bangladesh House Building Finance Corporation and Grameen Bank were given a dollop of Tk 3.09 billion in total to meet their capital needs.
During the July-December period of the fiscal year 2014-15, Sonali and Basic banks were given Tk 15 billion to restructure their capital base
A senior finance ministry official said in line with the Basel-II requirement the authorised capital of the stare-run banks was raised. Besides, a significant amount of money of some SoBs was gobbled up by some vested quarters. The financial base of Sonali and BASIC banks became very weak after two big scams, he said.
He also said the problem-ridden Basic Bank was given Tk 12 billion for recapitalisation as bailout package since the bank is suffering from massive capital shortfall after big loan scams two years back.
However, he was sceptical how positively the finance division will respond in disbursing money when the exchequer was facing increased expenditure to implement the new pay scale for public servants.
BFID secretary Dr Aslam Alam could not be reached for a comment despite several attempts.
When contacted, former governor of the central bank Dr Salehuddin Ahmed told the FE Wednesday that the draining of public money in the name of bank recapitalisation was not a fair move.
"These banks have not been making any serious attempt to recover the loans and the money which has been looted by vested quarters. The bankers wait for easy money from public exchequer without performing duty properly," he said.
"It looks like government is pouring water into pipeline and bankers are taking that from taps," Mr Ahmed commented.Â Â
He said the government should take tough stance and ask the bankers to recover the bad loans first to get any help from the exchequer.
"Through this process of pumping money into the banks, the government's liabilities are increasing day by day," said the former Bangladesh Bank governor, adding: "I am not in favour of recapitalisation anyway."
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