15 banks in provision shortfall

The number of banks that faced provisioning shortfall rose to 15 last year, the highest in history of the country's banking sector, exposing the worsening financial health of the lenders.

The banks faced a combined provisioning shortfall of Tk 9,523 crore in 2018. In 2017, the provisioning shortfall stood at Tk 9,375 crore at nine banks, data from the Bangladesh Bank showed.

Rising default loans and a lack of corporate governance pushed higher the number of banks facing the shortfall.

The 15 banks are Sonali, BASIC, Agrani, Rupali, AB, Dhaka, Bangladesh Commerce, Mutual Trust, National, Premier, Shahjalal Islami, Social Islami, Standard, Trust, and South Bangla Agriculture and Commerce Bank.

Such a high number of banks have never faced a provisioning shortfall in the history of the banking sector, a BB official told The Daily Star yesterday.

Some of them have been facing the deficit for a long time as they disbursed loans flouting rules, he said.

But it is a bad sign that South Bangla Agriculture and Commerce, one of the fourth-generation banks that got licence in 2013, faced the shortfall.

A shortfall is an amount by which a financial obligation or liability exceeds the amount of cash that is available. The shortfall can be temporary, arising out of a unique set of circumstances, or it can be persistent, which may indicate poor financial management practices.

The provisioning shortfall indicates that the lenders, which failed to maintain the regulatory requirement, have gradually become risky for the depositors, said Khondker Ibrahim Khaled, a former deputy governor of the central bank.

“The rising bad debt is mainly liable for the provisioning shortfall,” he said.

He says default loans go up when banks fail to ensure corporate governance.

“So, the central bank should take prompt initiatives to restore credit discipline at the banks in the interest of the depositors.”

As per BB 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.