Eleven banks were faced with a capital shortfall of Tk 27,918 billion in September, which revealed their fragile health.
The banks are Bangladesh Krishi, Sonali, Agrani, BASIC, Janata, Rupali, Rajshahi Krishi Unnayan, ICB Islamic, Bangladesh Commerce, Padma and AB Bank.
Corruption at the banks is primarily responsible for the large capital shortfall.
As of September, the Bangladesh Krishi Bank had the highest deficit of Tk 12,144 billion, 12 percent more than nine months ago, according to data from the Bangladesh Bank.
However, Sonali’s capital shortfall decreased from Tk 3,063 billion in the reporting period to Tk 2,633 billion.
The central bank should take immediate action to address the issue as such a situation sends a negative signal to the global community that the banking sector is weakening, a central bank official said.
Foreign companies primarily review banks’ capital adequacy and bad loans before making investment decisions. This capital gap will keep foreign investors in check, said the central banker.
Although the banking sector posted a capital surplus in the third quarter, the amount decreased significantly due to the increase in defaulted loans.
The sector had a capital surplus of Tk 12,418 billion in September, 22 percent less than in December last year. Bad loans totaled Tk 101,150 billion, an increase of 14 percent over the same period last year.
The capital shortfall at Janata Bank fell to Tk 1,416 billion compared to Tk 5,475 billion. Various frauds were responsible for the shortage at the state bank.
Md Abdus Salam, managing director of Janata Bank, said the shortfall would decrease over the next year as the lender’s operating profit increased.
Agrani Bank’s capital shortfall decreased to Tk 2,463 billion in September, compared to Tk 3,002 billion in December.
Mohammad Shams-ul Islam, chief executive officer of Agrani Bank, said state lenders should jointly make a concerted effort to reduce the deficit.
“We will shortly make a proposal to the government to fill the void,” he said, adding that the lender is now providing 42 types of government services to people without charging any fees.
The government can issue a loan in favor of Agrani Bank so that it can match the securities with its capital, Islam said.
“This will help us improve our capital position. We will also repay the same amount of the bond to the government when the instrument matures.”
The capital shortfall at Padma Bank amounted to Tk 540 billion in September, an increase of 75 percent over nine months.
Md. Ehsan Khasru, managing director of the private commercial bank, said the previous management and the board had been involved in massive irregularities in the lending process.
“Current management is trying to improve financial health, and it usually takes at least five to six years to turn a fragile bank into a good one.”
“We are now trying to attract foreign direct investment to strengthen the capital base.”
The capital shortfall at AB Bank was Tk 355 billion in September, compared to a surplus of Tk 278 billion in December.