12 banks face provision shortfall of Tk 10,834cr

Twelve banks altogether faced provisioning shortfall of Tk 10,834 crore in the third quarter the year, creating a risk of moral hazard for the entire banking sector.

“It is an ominous sign,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

As per Bangladesh Bank regulations, banks have to keep 0.50 percent to 5 percent provisioning against general category loans, 20 percent against classified loans of substandard category, 50 percent against classified loans of doubtful category, and 100 percent against classified loans of bad or loss category.

The central bank should take prompt action and compel the banks to keep the required provisioning at the earliest. “Otherwise, the tendency will infect other lenders.”

The banks are: Sonali, Agrani, Rupali, BASIC, AB, Bangladesh Commerce, Mutual Trust, National, Premier, Social Islami, Shahjalal Islami and Standard.

Mansur, a former economist of the International Monetary Fund, went on to suggest the central bank to put an embargo on the banks' directors from taking any profit to curb the problem.

The banks will keep aside their operational profits to maintain provisioning shortfall in line with the macro-prudential regulations of the central bank.

“The directors can enjoy profits after ensuring that the required provisioning has been taken care of,” he added.

The trust of the common people has gradually lessened in the banking sector because of a large amount of provisioning shortfall, said AB Mirza Azizul Islam, a former finance adviser to a caretaker government.

The banks facing provisioning shortfall should issue bonds or right shares to meet regulatory requirement, he said.

The upward trend of the default loans is largely responsible for the provisioning deficit, said a BB official.

At the end of September, non-performing loans in the banking sector nearly hit Tk 1 lakh crore, up 11.23 percent from three months earlier.