• Saturday, April 19, 2014

Four state banks get Tk 4,100cr to fix capital deficit

Rejaul Karim Byron

The finance ministry has injected around Tk 4,100 crore into four state-owned commercial banks to help them meet their capital shortfalls on condition that the banks will go through credit risk-related reforms.
Sonali Bank received Tk 1,995 crore, Agrani Tk 1,081 crore, Janata Tk 814 crore and Rupali Tk 210 crore. 
Early this month, the central bank sent the 'business plans' of the banks to the Banking Division, credit risk management policy being a major component of the plan, a finance ministry official said. 
The amount came in the first phase of a bailout package of the government against the banks' total capital shortfall of Tk 8,863 crore as of September as per an estimate of the central bank.
According to the World Bank, the four banks' capital shortfall is Tk 17,600 crore.
In line with the International Monetary Fund's conditions tagged with loans under its Extended Credit Facility programme, the government has taken steps to meet the capital shortfall of the banks in two phases.
As the banks are facing a huge capital shortfall due to various scams last year, the IMF set a condition that public money will be injected into the banks only if they go through drastic reforms.
One of the conditions set by the IMF was that Bangladesh Bank will conduct separate diagnostic review for the four banks.
The central bank completed the review in June and the diagnostic examination revealed significant weakness in asset quality, liquidity management, and internal audit and control in the banks.
The diagnostic examination found that credit policies were not comprehensive, were not reviewed regularly and often not followed. 
Loans were extended without appropriate credit analysis or proper documentation and problem loans were not receiving enough attention.
The review also found an absence of strategic planning for credit portfolio.  
On the basis of the examination, the banks prepared their business plans and got those endorsed by their respective boards. 
The state banks incorporated a sector-wise credit growth plan in their credit risk management policy, according to the business plans of the banks.
The banks showed that their highest credit growth would not exceed 8-12 percent in the trading sector and 2 percent in the industrial sector.

Published: 12:00 am Friday, December 27, 2013

Last modified: 9:32 pm Friday, December 27, 2013

Comment Policy