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Provision shortfall in 10 banks stands at Tk 15,351 cr

Published : Friday, 26 November, 2021 at 12:00 AM  Count : 100
Business Correspondent

Ten banks suffered provision shortfalls worth Tk 15,350.96 crore at the end of September amid poor state of financial health in complying with regulatory requirements.
The shortfalls in 10 banks were Tk 493 crore higher than the provision shortfalls at 11 banks at the end of June. Social Islami Bank, which suffered Tk 15 crore in provision shortfalls at the June-end quarter, managed to maintain an adequate provision at the September-end quarter.
Apart from BASIC Bank, Janata Bank, Agrani Bank, Rupali Bank, Bangladesh Commerce Bank, National Bank, Dhaka Bank, Mutual Trust Bank, Bangladesh Krishi Bank and Standard Bank failed to maintain the provisions.
As per banking rules, the banks are bound to set aside a certain amount of money against their risk-weighted assets as a means of protection for depositors' money.
The banks are supposed to maintain provisions ranging between 0.5 per cent and 5 per cent against regular loans. While the ratio of keeping provision against loans classified as substandard is 20 per cent, the ratio is 50 per cent for loans classified as doubtful and 100 per cent against bad loans.
High defaulted loans, also known as non-performing loans in the banking sector, were a major reason behind the 10 banks' failure to keep adequate provisions at the end of September, BB officials said.
At the end of September, the amount of defaulted loans in the country's banking system rose to Tk 1,01,150.3 crore even though there was a regulatory restriction in place on downgrading loan status till December 31, 2021 if the borrowers paid 20 per cent of the overdue by December.
Of the banks, Janata Bank suffered the highest provision shortfall of Tk 5,313.18 crore.
Janata Bank's extension of around Tk 9,000 crore loan between 2009 to 2014, when Abul Barakat was its  chairman, to two groups of companies turned the situation worse.
Janata Bank is holding the highest Tk 13,837.17 crore non-performing loan out of the total defaulted loans in the banking sector. Apart from it, the provision shortfall of BASIC Bank, shot up to Tk 3,663.03 crore at the September-end quarter of 2021. Its provision shortfall was the second highest among the ten banks.
National Bank's provision shortfall was Tk 2,385.06 crore with default loans exceeding Tk 4,500 crore. It prompted the central bank to ask it to refrain from disbursing fresh loans until its Advance-deposit Ratio (ADR) ratio came down to 87 per cent.
State-owned Agrani suffered provision shortfall of Tk 2,128.07 crore at the end of the third quarter of 2021 while its provision shortfall stood at Tk 1,319 crore at the end of December 2020.
Rupali Bank's provision shortfall stood at Tk 922.17 crore at the September-end quarter, followed by  471.71 crore-provision shortfall of Bangladesh Commerce Bank and Tk 190.88 crore shortfall of Dhaka Bank, Tk 156.8 crore of Mutual Trust Bank, Tk 99 crore of Standard Bank and Tk 21.06 crore of Bangladesh Krishi Bank.

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