Govt may inject 1,500cr into state-run banks | 2019-06-11

Govt may inject 1,500cr into state-run banks

Hasibul Aman

11 June, 2019 12:00 AM printer

The government is likely to set aside Tk 1,500 crore in the upcoming budget to help the struggling state-owned commercial banks overcome capital shortfalls. 

The move comes after the central bank’s recommendation and demand of state banks that now grapple with huge capital shortage due to rising non-performing loans, finance ministry sources said.  

In a recommendation letter, Bangladesh Bank observed that the financial base of state-owned commercial banks has become weak because of the capital crunch.

In separate letters, public banks placed their individual demand for capital money, which totaled Tk 24,711 crore. Against this demand, the government will pump in Tk 1,500 crore in FY20 budget like the outgoing fiscal year, sources informed.

Large loan scams and inability to recover bad loans are mainly responsible for huge capital shortfalls in the state-owned banks.  

Official data suggest that six state banks’ aggregate capital deficit skyrocketed to Tk 25,130 crore in December in 2018.

The banks are Bangladesh Krishi Bank, Janata Bank, Sonali Bank, Agrani Bank, BASIC Bank and Rajshahi Krishi Unnayan Bank (RAKUB).

In the last 10 years, the government supplied a total of Tk 17,735 crore capital money to the ailing state banks through budgetary allocation since the 2009-10 fiscal year.  

Allocation reached its peak at Tk 5,068 crore in 2013-14 fiscal year whereas it hit the bottom at Tk 420 crore in 2012-13 fiscal year. In the current 2018-19 fiscal year, the allocation was Tk 1,500 crore.

When recapitalizing state-banks started in 2009-10 fiscal year allocation was Tk 1,000 crore, which rose to Tk 1,050 crore in the following year but fell to Tk 700 crore in 2011-12 FY.

Besides, Tk 2,617 crore was allocated in 2014-15 fiscal year for the purpose, while Tk 1,800 crore was set aside in 2015-16FY, Tk 2,000 crore each in the following two years.   

Official sources said Sonali Bank has so far got the highest amount from the government to meet capital deficit followed by BASIC Bank, which faced huge set back in their capital base after some large loan scams. 

Sonali Bank received Tk 3,405 crore in Awami League government’s last two terms, while BASIC Bank got Tk 3,390 crore, Agrani Bank Tk 1,081 crore, Janata Bank Tk 815 crore, Bangladesh Krishi Bank Tk 735 crore and RAKUB Tk 322 crore and Rupali Bank Tk 310 crore.

Economic analysts have raised concern over the practice of recapitalizing state-owned banks from the state coffer, saying that the trend won’t help improve these banks health rather it will encourage default loans. 

The budget for FY20 is slated to be placed at the national parliament on June 13. It will be the first budget of the Awami League government’s third consecutive term as well as Finance Minister AHM Mustafa Kamal.