Four SoBs face Tk 101b capital shortfall

Four state-owned banks (SoBs) are facing an immense capital shortage and thus experiencing difficulties in running day-to-day banking affairs and foreign trade properly, officials have said.
Until December last the aggregate capital shortage of the banks reached Tk 101 billion (10,100 crore).
Until then Bangladesh Krishi Bank (BKB) had a capital shortfall of Tk 66.43 billion, BASIC (Bangladesh Small Industries and Commerce Bank Ltd) Bank Tk 22.23 billion, Rajshahi Krishi Unnayan Bank (RAKUB) Tk 8.84 billion and Sonali Bank Tk 3.94 billion.
Chief executives of the banks at a meeting at the finance ministry on Wednesday said they were facing immense problems with running their banking activities due to the capital shortage.
They requested the government to provide necessary funds for recapitalisation of the banks so that they could run day-to-day affairs smoothly and keep provision with the central bank against their classified loans (CLs).
Sources said during the meeting additional secretary of Bank and Financial Institutions Division under the Ministry of Finance (MoF) Gokul Chand Das assured the bankers about recapitalisation of the banks in phases so that those do not face difficulties in operation.
"We have to meet the capital shortage. But we do not have that much capability. So, we will do it in phases as was done earlier," Mr Das was quoted as saying by a meeting participant.
During the fiscal year 2013-14 the government in the first phase had pumped Tk 41 billion in recapitalisation fund into Sonali, Janata, Agrani and Rupali banks. In the second phase the BKB, RAKUB, Bangladesh House Building Finance Corporation and Grameen Bank were given a total of Tk 3.09 billion to meet their capital need.
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. In the fiscal budget of 2014-15 the government kept Tk 50 billion to help recapitalise the state-run banks.
A senior MoF 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.
He said the financial base of Sonali and BASIC banks become very weak after two big scams.
Managing director of RAKUB Manjur Ahmed in a recent letter to the MoF sought about Tk 6.30 billion for recapitalisation of the bank. He said the capital shortfall now reached Tk 8.84 billion, of which Tk 6.48 billion was against risk-weighted assets and Tk 2.36 billion against the provision shortfall for other assets of the bank.
When contacted, BASIC Bank's managing director Khondoker Md Iqbal did not want to comment about it saying that he needed permission from the board of directors to talk to the media.
However, a senior official of the bank said the capital base of BASIC bank had broken down after the scam, which led to reconstitution of the board and management.
He said the bank was trying to overcome the capital shortage. "I think we will see a turnaround by the end of this year."
Mr Iqbal in a letter to the MoF early this week said the capital shortage of the bank increased due to the rise in classified loans and the degradation of status. As a result, the bank's required provision against classified loans also increased significantly, he said.           
"The ongoing capital shortage has awfully affected loan management, CAMELS rating, credit rating, international trade and day-to-day activities of the bank," Mr Iqbal wrote.
He added: "Maintaining correspondent relationship with foreign banks has become very tough for the bank."
He also wrote that foreign banks were losing confidence in the BASIC Bank due to the ongoing capital shortage.
Managing directors of Sonali Bank and BKB could not be reached for comment despite several attempts.  
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