Banks run short on provisioning

Overall shortfall in provision against both classified and unclassified loans in the country's banking system swelled by nearly 28 per cent or Tk 11.87 billion in the last calendar year.
Officials said the banks ran short on the provisions following conditional rescheduling of loans.
The amount of provisioning shortfalls rose to Tk 54.70 billion as on December 31 from corresponding Tk 42.83 billion of the previous year, according to latest statistics with Bangladesh Bank (BB).
"Some banks have maintained more provisions against their conditional rescheduling of loans," a BB senior official told the FE Sunday to explain the banking situation.
Also, he said, a large amount of non-performing loans had been rescheduled with some conditions set by the central bank to minimise risks
Such rescheduled credits were treated as unclassified ones, but the banks were asked to maintain provisions in accordance with previous status of the loans, the central banker explained.
"Fresh classified loans also pushed up the volume of provision shortfalls with the banks," the BB official noted.
Only six banks out of 57 have failed to keep requisite provisions against loans, particularly classified ones, according to officials.
Of them, three are state-owned commercial banks (SoCBs) and the rest private commercial banks (PCBs).
Under the existing BB regulations, the banks have to keep 0.25 per cent to 5.0 per cent provisions against general-category loans, 20 per cent provision against substandard category, 50 per cent against doubtful loans and 100 per cent against bad or loss category.
The banks normally keep required provisions against their unclassified and NPLs from their operating profits in a bid to mitigate financial risks, another BB official said.
"The banks will have to maintain provisioning against all types of loans to protect the interests of their (banks) depositors," the central banker said on a note of caution about the flipside of banking operations.  
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