Dhaka, Bangladesh (BBN)– Bangladesh’s nine suffered an aggregate capital shortfall worth BDT 194.67 billion in 2017 mainly due to their higher classified loans.

The nine banks–four state-owned commercial banks (SoCBs), three private commercial banks (PCBs) and two specialised banks (SBs)–were put on the list of capital shortfall, according to the central bank’s latest statistics.

Two banks –one a SoCB and another fourth-generation PCB –hit the list of capital-deficient banks during the third quarter of 2017 when total capital shortfall was BDT 17.70 billion.

Seven banks, however, were suffering from capital shortfall worth BDT 153.04 billion in 2016.

The overall capital shortfall of the four SoCBs –Sonali, Janata, Rupali and BASIC— rose to BDT 88.53 billion as on December 31 last year from BDT 69.12 billion three months before.

However, the capital shortfall of two specialized banks (SBs)—Nangladesh Krishi Bank (BKB) and Rajshai Krishi Unnyan Bank (RAKUB) –stood at nearly BDT 85.90 in the fourth quarter (Q4) of 2017 from BDT 82.83 billion as on September 30, 2017.

The capital shortfalls of three PCBs –Bangladesh Commerce Bank Limited, Farmers Bank Limited and ICB Islamic Bank Limited –amounted to BDT 20.24 billion in the Q4 from BDT 17.91 billion in the Q3 of 2017.

“The banks had kept aside more money from their capital for maintaining provisioning requirements against their both classified and unclassified loans,” a senior official of the Bangladesh Bank (BB) told the BBN while explaining the main cause of the capital shortfall.

Overall shortfall in provision against both classified and unclassified loans in the country’s banking system jumped by nearly 24 per cent or BDT 12.97 billion in the last calendar year.

Nine banks out of 57 have failed to keep requisite provisions against loans, particularly classified ones in 2017 following higher classified loans along with conditional rescheduling of credits.

The volume of default loans in the country’s banking system jumped by 19.51 per cent or BDT 121.31 billion in the last calendar year despite close monitoring by the central bank.

The amount of non-performing loans (NPLs) rose to BDT 743.03 billion as on December 31 last year from BDT 621.72 billion on the same day of the previous year, the BB data showed.

On the other hand, the overall capital-to-risk weighted-asset ratio (CRAR) of all banks rose to 10.83 per cent in the final quarter of 2017 from 10.65 per cent three month before following lower trend of NPLs, according to the central banker.

He also said stronger recovery drives by the commercial banks and the rescheduling of loans pushed down the NPLs in the final quarter of 2017.

During the October-December period of 2017, the classified loans dropped by more than 7.0 per cent or BDT 60.04 billion to BDT 743.03 billion from BDT 803.07 billion in the Q3.

All PCBs’ CRAR was found, on average, 12.52 per cent as on December 31 last while the CRAR of nine foreign commercial banks stood at 24.90 per cent.

“But the capital position of public banks is still a matter of grave concern,” the BB official noted.

The CRAR of six SoCBs stood at 5.04 per cent as on December 31 last calendar while the CRAR of two SBs was in the negative territory at 35.45 per cent.

However, the total regulatory capital of all banks rose to BDT 945.61 billion during the October-December from BDT 901.01 billion three months ago.

Bangladesh started implementing the Basel-III standard for calculation of CRAR of all banks in Q1 of 2015 for consolidating stability in the banking sector.

Under a roadmap to comply with the Basel-III, the banks will have to maintain 11.875 per cent of CRAR in 2018. Finally in 2019, it will hit the desired level of 12.50 per cent.

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 deficiencies in financial regulation revealed by the financial crisis of the late 2000s.

The Basel-III is set to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage.

BBN/SSR/AD