Capital shortfall of BKB, RAKUB crosses Tk 64.50 billion

Siddique Islam | Published: April 27, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

Capital shortfall of two state-owned agricultural banks - BKB and RAKUB - has crossed Tk 64.50 billion, putting them into a difficult situation to comply with Basel-II requirements, officials said.Â Â Â
Such capital shortfall of the Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) has been attributed to operating losses due mainly to lending at 'subsidized' rate of interest.
Â "Two banks have faced capital shortfall over the years mainly for their operating losses," a senior official of the Bangladesh Bank (BB) told the FE.
The capital shortfall of two banks rose to Tk 64.52 billion as of December 31 last year from Tk 62.25 billion three months back, according to the central bank statistics.
The banks are collecting deposit, offering higher interest rates, but they lend their funds at subsidized rate of interest, the central banker noted.
Besides, a substantial amount of money unrealised from the government mainly for waving of agricultural credits at different times has also contributed to increase the capital shortfall, a BKB official said.
Both the banks have sought recapitalisation support from the Bank and Financial Institutions Division (BFID) of Finance Ministry to meet their capital requirements in line with the Basel-II framework.
The central bank has recommended to the BFID at a meeting held at the finance ministry recently for arranging such fund to improve the financial health of the banks.
"We've submitted a proposal seeking recapitalisation support from the BFID to meet our capital as per Basel-II requirements," a senior executive of the RAKUB told the FE without elaborating.
He also said the RAKUB has requested the BFID to arrange such fund from the ongoing fiscal year's budgetary allocation.
"An amount of money might be kept for the recapitalisation purposes while revising the overall budgetary allocations next month," a senior official of the finance ministry told the FE.
The capital adequacy ratio (CAR) of the country's banking sector improved significantly in the fourth quarter of the last calendar year following injection of fund worth Tk 41 billion by the government to the state-owned commercial banks (SoCBs).
The CAR of all banks rose to 11.52 per cent as of December 31 last year from 9.14 per cent in the third quarter of the same year, the BB data showed.
In December last year, the government provided the fund as recapitalisation support to four SoCBs for meeting their capital shortfall in line with the Basel-II accord.
The central bank earlier fixed the CAR at minimum 10 per cent as part of the preparation for implementing the Basel-III in the banking sector in 2014, the BB official added.
Under the Basel-II, the standard requirement of the CAR is minimum 8.00 per cent.
Bangladesh is now implementing the Basel-II accord to consolidate the capital base of banks in line with the international standard.
It has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.
Three types of risks - credit, market and operational risks - have to be considered under the minimum capital requirement.