The government has set aside another Tk 5,000 crore in the proposed budget to inject as fresh capital into the increasingly weakening state banks, to cover up the messes largely created by politically appointed boards.
Finance Minister AMA Muhith spoke of the allocation to a group of reporters at his secretariat yesterday.
In the outgoing fiscal year, the state banks were allocated Tk 4,405 crore to meet capital deficits, of which four banks received Tk 4,100 crore.
The boards of the state banks were reconstituted in fiscal 2009, and most of the appointees were picked on politically motivated favouritism. In the last term of the government, various scams, including the one involving Hall-Mark, led to hollowing of the banks' financial bases.
Allegations are rampant that the scams took place due to interference by the politically appointed directors.
Muhith admitted the political appointments, saying; “In some cases there were mistakes in our choices. As a result, some irregularities may have taken place.”
“Some political appointments are made to the board of directors and that will continue in future.” However, regulations will be put in place to avert undue interference, he said.
In September last year, loan defaults of the state banks increased, and the combined capital deficit had risen to Tk 8,863 crore.
After the government had pumped funds into the banks, they showed capital of Tk 11,409 crore by December, with a surplus of Tk 855 crore.
However, the International Monetary Fund projects many of the state banks will require even more capital in 2014, as their loan portfolios will further deteriorate from necessary rescheduling of many of the loans currently adjudged under a relaxed rescheduling policy.