WB opposition stalls Rupali Bank's rights share move
Wednesday, 30 December 2009
Nazmul Ahsan
The World Bank's opposition is likely to delay a government decision on the issuance of right shares by the largely state-owned Rupali Bank.
The negative stand on the part of the multilateral lender has put the Ministry of Finance (MoF), which was about to approve the right share move after receiving green signal from the central bank, in a dilemma, sources said.
'The opposition from the WB will delay the process or make things uncertain for at least six months," a top official in the MoF told the FE.
"The suggestion from the WB has come after we finalized a package formula including the issuance of three right shares against each existing share of Rupali Bank ltd to increase the bank's paid-up capital."
The issuance of interest bearing bond against the money the state-owned enterprises (SoEs) and other government organizations owe to Rupali, may also take more time as the top boss of the MoF is yet to make up his mind as far as strengthening, financially, the Rupali Bank is concerned, an official said.
The WB, in a recent communication to the finance ministry, has also advised the government to explore different options for re-capitalization of Rupali Bank, issuance of government bonds at five per cent rate of interest, which is below the cost of fund for Rupali. It has said issuance of right shares would not strengthen the capital base of the bank in real terms. Rather, it added, such shares would benefit the existing private shareholders.
'A better approach would be for the Bangladesh Bank to exercise its power under the BB Act to write down the capital to zero and re-capitalize the bank to a level that meets the prudential capital adequacy ratio under the Purchase and Assumption Procedure', the WB said.
The board of directors of Rupali in last September decided to issue three right shares against each existing share of Rupali Bank ltd to raise its paid-up capital by June 30, 2010, a deadline set by BB for all commercial banks in the country.
The BB in its opinion said that Rupali Bank Ltd would be financially strengthened and its paid up capital increased if right shares as per the Rupali's decision are issued.
Bangladesh Bank in 2008 issued a circular to increase bank capital to at least Tk 4.0 billion and out of which Tk 2.0 billion must be paid-up capital by August 11,2010 to meet the Basel-II requirement.
The banks need to maintain Tk 4.0 billion or 10 per cent of its risk-weighted assets, which one is higher, as capital and based on the calculation the required capital of Rupali Bank on June 30 this year was Tk 5.31 billion.
Presently, the government owns 94.55 per cent share of Rupali.
As per un-audited quarterly accounts for the 3rd quarter ended on 30th September 2009, Rupali Bank has reported net profit of Tk. 1,109.43 million with EPS of Tk. 88.75 as against Tk. 157.48 million and Tk. 12.60 respectively for the same period of the previous year, according to the information posted in the Dhaka Stock Exchange web site.
The World Bank's opposition is likely to delay a government decision on the issuance of right shares by the largely state-owned Rupali Bank.
The negative stand on the part of the multilateral lender has put the Ministry of Finance (MoF), which was about to approve the right share move after receiving green signal from the central bank, in a dilemma, sources said.
'The opposition from the WB will delay the process or make things uncertain for at least six months," a top official in the MoF told the FE.
"The suggestion from the WB has come after we finalized a package formula including the issuance of three right shares against each existing share of Rupali Bank ltd to increase the bank's paid-up capital."
The issuance of interest bearing bond against the money the state-owned enterprises (SoEs) and other government organizations owe to Rupali, may also take more time as the top boss of the MoF is yet to make up his mind as far as strengthening, financially, the Rupali Bank is concerned, an official said.
The WB, in a recent communication to the finance ministry, has also advised the government to explore different options for re-capitalization of Rupali Bank, issuance of government bonds at five per cent rate of interest, which is below the cost of fund for Rupali. It has said issuance of right shares would not strengthen the capital base of the bank in real terms. Rather, it added, such shares would benefit the existing private shareholders.
'A better approach would be for the Bangladesh Bank to exercise its power under the BB Act to write down the capital to zero and re-capitalize the bank to a level that meets the prudential capital adequacy ratio under the Purchase and Assumption Procedure', the WB said.
The board of directors of Rupali in last September decided to issue three right shares against each existing share of Rupali Bank ltd to raise its paid-up capital by June 30, 2010, a deadline set by BB for all commercial banks in the country.
The BB in its opinion said that Rupali Bank Ltd would be financially strengthened and its paid up capital increased if right shares as per the Rupali's decision are issued.
Bangladesh Bank in 2008 issued a circular to increase bank capital to at least Tk 4.0 billion and out of which Tk 2.0 billion must be paid-up capital by August 11,2010 to meet the Basel-II requirement.
The banks need to maintain Tk 4.0 billion or 10 per cent of its risk-weighted assets, which one is higher, as capital and based on the calculation the required capital of Rupali Bank on June 30 this year was Tk 5.31 billion.
Presently, the government owns 94.55 per cent share of Rupali.
As per un-audited quarterly accounts for the 3rd quarter ended on 30th September 2009, Rupali Bank has reported net profit of Tk. 1,109.43 million with EPS of Tk. 88.75 as against Tk. 157.48 million and Tk. 12.60 respectively for the same period of the previous year, according to the information posted in the Dhaka Stock Exchange web site.