17 banks short of capital despite BB move

Seventeen banks still fall short of a total Tk 6,467 crore in required capital although Bangladesh Bank (BB) moved to raise banks' capital to safeguard the depositors' interests and maintain international standards.
According to central bank statistics as of June 30, three state-owned banks' capital deficit stood at Tk 1,932 crore, three specialised banks' Tk 3,215 crore, seven private banks' Tk 1,174 crore and four foreign banks' at Tk 146 crore.
The rest 31 banks out of a total 48 operating in the country have Tk 3,260 core surplus capital.
Of the banks having surplus capital, one state-owned bank has a surplus of Tk 388 crore, two specialised banks have Tk 103 crore, 23 private banks Tk 1,298 crore and five foreign banks have Tk 1,471 crore.
State-owned Rupali Bank falls short of Tk 1,488 crore in capital, Janata Bank Tk 261 crore and Agrani Bank Tk 181 crore.
A senior BB official said Janata Bank and Agrani Bank managed to reduce their shortfalls in the last six months.
In December, Janata Bank's capital shortfall was Tk 859 crore and that of Agrani Bank was Tk 1,778 crore.
The largest state-owned bank, Sonali, had Tk 4,093 crore shortfall in December. But in June, the bank did not have any, rather it made a surplus capital of Tk 388 crore.
Sources said the recent reforms taken in the state-owned banks including turning those into public limited companies helped cut their shortfalls.
But the condition of Rupali Bank worsened mainly due to the government's failure to sell the bank to a Saudi buyer.
In December, Rupali's shortfall was Tk 266 crore. The amount rose by Tk 1,222 crore in six months (January-June).
Out of the private banks' total capital shortfall of Tk 1,174 crore, ICB Islami Bank, previously Oriental Bank, falls short of Tk 901 crore, and Bangladesh Commerce Bank Tk 102 crore.
ICB Islami Bank took the liabilities of Oriental Bank that faced pervasive corruption and forced the BB to sell it of.
The central bank is closely monitoring the situation of Bangladesh Commerce Bank, a problematic one, a BB official said.
The official preferring anonymity said the four foreign banks facing capital shortfall are not the mainstream banks.
Among the three specialised banks facing capital deficit, Krishi Bank alone has Tk 2,844 crore shortfall.
A senior Krishi Bank official said the bank's shortfall shot up due to the loans disbursed in the Sidr-hit areas. The bank shortfall went up further with the rise of default loans.
Capital adequacy is an integral part of banking sector development and regulatory reforms as higher capital helps absorb risks and creates confidence among depositors, a senior BB official said.
It is mandatory for a bank to have a minimum capital of Tk 200 crore or the capital should be 10 percent of the bank's risk-weighted assets.
If the amount for 10 percent of risk-weighted assets surpasses Tk 200 crore, the bank should consider the amount as capital.
Risk-weighted asset is in terms of the minimum amount of capital that is required within banks and other institutions, based on a percentage of the assets, weighted by risk.
The idea of risk-weighted assets is a move away from having a static requirement for capital. Instead, it is based on the riskiness of a bank's assets. For example, loans that are secured by a letter of credit would be weighted riskier than a mortgage loan that is secured with collateral.
In August, BB raised the amount of minimum capital to Tk 400 crore, which the banks have to achieve by 2011 in order to maintain international standards.