The International Monetary Fund has asked the government to put aside Tk 5,000 crore in the upcoming budget as capital for the four state-owned banks.
Of the total amount, the IMF suggested, Tk 1,500 crore should be dispatched to the four banks by December and the rest by June 2015, a finance ministry official said, referring to the lender's fifth review of the Extended Credit Facility.
The multilateral lender, however, has instructed that certain conditions be tagged with the hand-out, such that they obligate Janata, Rupali, Sonali and Agrani to improve their performance and automate their branches by 2016.
The move comes after the IMF forecasted that the four banks' capital position would deteriorate fast in the coming fiscal year, even though they have a capital surplus of Tk 855 crore as per the latest available data, which is of December 31 last year.
The expiry of the central bank's relaxed loan rescheduling policy in June, provisioning requirements for impending classified loans and the shift in July to BASEL III standard which requires higher capital adequacy, means the banks' capital position would run into a deficit.
In many cases, the state banks rescheduled loans which were not granted following the central bank's guidelines properly. These loans are set to become classified during Bangladesh Bank's scrutiny phase, meaning provisioning would be necessary for them. The official said the government has agreed in principle to provide the funds as per IMF's recommendations.
The IMF has strictly mentioned that banks cannot use the funds to give out fresh loans or any wasteful purpose.
Zahid Hussain, lead economist at the World Bank's Dhaka office, said conditions are a must to extract improved performance from management.
Meanwhile, some state banks have been found to give incentive bonuses to their staff with the money received from the government for the sole purpose of building on capital base. “It is a contradictory move. But if any other state bank gives incentive bonuses we also fall under pressure to give bonuses,” said Zaid Bakht, a director of Sonali Bank.
For instance, Janata Bank has given its staff four incentive bonuses for 2013, about which the central bank has raised question.
However, a Janata Bank official said the bank made net profits of Tk 900 crore last year, due to which the incentive bonus was handed out.