Dhaka, Bangladesh (BBN)– Ten banks, including six state lenders, suffered a total capital shortfall of BDT183.88 billion in the first quarter (Q1) of this year as rising classified loans wiped out their profits.

The banks include Agrani, BASIC, Janata, Rupali, Bangladesh Krishi and Rajshahi Krishi Unnayan, AB, Bangladesh Commerce, ICB Islamic and National Bank of Pakistan were categorised as capital-deficit lenders, according to the central bank’s latest statistics.

The central bank is set to issue letter to the banks, which failed to maintain the capital requirement, asking them to submit their action plans immediately mentioning how they will meet their shortfall, a senior central banker told the BBN in Dhaka.

He also said the Bangladesh Bank (BB) is now working on the issue.

The overall capital-to-risk weighted-asset ratio (CRAR) of all the banks operating in Bangladesh improved in the first quarter as regulatory forbearance was offered to some banks, according to BB officials.

These banks were allowed to defer the required provisioning against their classified loans under such a measure, they noted.

The overall CRAR rose to 11.41 per cent on March 31, 2019 from 10.50 per cent three months ago, the BB data showed.

The CRAR of six state banks stood at 6.85 per cent as on March 31 this calendar year, while that of two special lenders was in the negative territory at 31.65 per cent.

The government injects capital into the state banks every year but there has been no improvement in their capital base or their corporate governance.

In the last 17 years, the government has injected a total of BDT 205.84 billion into the public banks. This year, it will provide BDT 15 billion.

Injecting capital into the banks is a bad practice at a time when they are engaged in financial corruption, according to experts.

The CRAR of private banks was found, on average, 12.65 per cent as on March 31, while the ratio of nine foreign commercial banks reached 27.96 per cent.

“The banks had kept aside more money from their capital for maintaining provisioning requirements against their classified loans,” another BB official said about the capital shortage of the banks.

The volume of classified loans climbed by more than 18 per cent to Tk 1,108.73 billion in the Q1 of the year from Tk 939.11 billion in the previous quarter.

Bangladesh started implementing the Basel-III standard for calculation of CRAR of all banks in the first quarter of 2015 for consolidating stability in the banking sector.

Under a roadmap to comply with the Basel-III, the banks were required to maintain 12.50 per cent of CRAR by 2019.
Basel-III is a new global regulatory standard on banks’ capital adequacy and liquidity as agreed by the members of the Basel Committee on Banking Supervision.

The third of the Basel Accords was developed in response to the deficiencies in regulation exposed by the global financial crisis of 2008.

The Basel-III is set to strengthen the bank capital needs and introduce new regulatory requirements for bank liquidity.