Default credit, capital shortfall plague public banks
Banking and financial experts worried over poor credit assessment and gaping capital shortfall in public and specialised banks on Monday called for improving their risk management to ensure smooth operation and satisfactory service to the clients.
The capital shortfall of country's state-owned banks along with two private commercial banks stood at Tk 15,385 crore as of June last fiscal year due to huge number of classified loans, according to the latest data of Bangladesh Bank.
Banking experts expressed their concern over increase in default loans as well as the capital shortfall of the public, specialised and private banks.
These are Sonali Bank, Rupali Bank, BASIC Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank and ICB Islami Bank. These banks are facing huge problems to operate their existing business across the country due to increase of the default loans. They failed to recover their classified loans, as a result, these banks are facing capital shortfall.
Sonali Bank, the largest of the public banks in the country, failed to check their classified loans, which currently stood at Tk 11,421 crore and their capital shortfall reached at Tk 2,619 crore. The other public bank, Rupali's default amount is Tk 4,759 crore and the capital shortfall is now Tk 740 crore. The default amount of BASIC Bank is Tk 7,390 crore and the capital shortfall of the bank is Tk 2,210 crore.
Among the specialised banks, Bangladesh Krishi Bank's default loan is now Tk 4,315 crore and the capital shortfall of the bank is Tk 7,318 crore. The same situation prevails in the another specialised Rajshahi Krishi Unnayan Bank with default loan at Tk 1,202 crore and the capital shortfall at Tk 710 crore.
Out of the private commercial banks, Bangladesh Commerce Bank is facing capital shortfall due to increase in its classified loans. The default loan of the bank is now Tk 597 crore and the capital shortfall is Tk 312 crore. Another private commercial bank ICB Islami Bank is now facing the same situation because the default loan of the Bank is now Tk 707 crore and the capital shortfall is Tk 1,475 crore.
Dr AB Mirza Azizul Islam, a former finance adviser to a caretaker government, told the Daily Observer, the banks are not properly disbursing loans to the right customers. Most of the default loans have the common criteria of poor credit assessment of the banks, he claimed.
He suggested banks to improve risk management for reducing classified loans. Default loan is hampering the development process of the country. Most of the public banks are now facing capital shortfall, which is hindering operation of their businesses in the country, he said.
The banks failed to disburse more loans to the new entrepreneurs due to capital shortfall of the public banks, he claimed.
Pointing to the weak management of Bangladesh Bank, Khondoker Ibrahim Khaled, former deputy governor of Bangladesh Bank, said the default loans are increasing due to poor credit assessment and the rising number of loans doled out on political consideration especially by the public and specialised banks.
The public banks are repeatedly failing to recover their classified amount, especially with the large borrowers. The state-owned and specialised banks of the country are facing capital shortfall mainly due to their higher non-performing loans.