Now BKB seeks Tk 67b to replenish capital

Bangladesh Krishi Bank (BKB), a state-owned specialised bank, alone has sought some Tk 66.55 billion for its recapitalisation when the government earmarked a sum of Tk 50 billion in the national budget for the current fiscal year for the purpose, officials said.
This past week, the government gave Tk 12 billion to the scam-ridden BASIC Bank Ltd to meet its capital shortfall.
BKB Managing Director M A Yousoof in a letter last week requested the ministry of finance (MoF) to arrange the fund to meet an increased demand for loans.
In the letter he wrote that as a specialised bank the BKB plays a significant role in implementation of various development and social activities, including investment in agriculture sector, which lessens its scope to do commercial banking. The bank fails to achieve expected level of profit for this cardinal reason.
Mr Yousoof claimed the bank has been playing a crucial role for ensuring food security and strengthening rural economy by lending to sectors like crops, fisheries, livestock and small and medium scale industries.
Also, there is increased demand for credits in these sectors, especially in agriculture, to further strengthen the rural economy.
"Meeting the capital shortfall of BKB is necessary to help meet the increased demand for loans in the rural areas," the MD pleaded.
The bank has set a target of disbursing Tk 48 billion as agriculture credits in the current fiscal year (FY), 2015-16.
When contacted, secretary of the Banks and Financial Institutions Division under the Ministry of Finance Dr Aslam Alam told the FE that a three-year plan has been submitted to the finance division for recapitalisation of the state-owned banks.
"It is true that the BKB needs money to meet capital shortfall. But providing such a big amount at one go is not possible. Let's see what can be done," he said, indicating possible trimming of the amount seen as king's ransom.
Asked about the reasons of such capital shortfall, Mr Alam said banks which provide agriculture credits have historical losses since on several occasions in the past the government had waived both loans and interests thereon to help the farmers.
Besides, the state-owned banks pay agriculture credits at lower interest rates while their operational cost is high, leading to their lower profit earning.
Mr Alam further pointed out that as many farmers have the propensity to default on repayment of loans, the non-performing loans (NPLs) of the agricultural banks have become high. As a result, they need to keep high amounts of money with the central bank as provision against the NPLs, which causes erosion in their capital.
"Despite these problems, the govt needs to re-capitalise the state-owned banks to help continue development of the country," he said, adding: "We can't stop providing agri-credit."
Mr Aslam said big state-owned banks, like Sonali Bank, need to be recapitalised for the sake of entire banking sector, since it carries out majority portion of international banking for the country.
"If Sonali bank falls in problem due to the capital shortfall, foreign banks won't feel interested to do banking with other local banks and may tag additional charges," he added.
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