The government has allocated a significant amount of fund in the proposed budget for fiscal year (FY) 2020-21 to recapitalise the state-owned banks at a time when budget financing remains a big challenge.
A total of Tk 15 billion has been earmarked in the new budget for the state-owned commercial banks (SoCBs) like Sonali Bank and the BASIC Bank.
The banks needed the fund to meet their capital shortfall.
According to an estimate, the government spent over Tk 157.05 billion in nine fiscal years since FY 2009 for the SoCBs, according to the Centre for Policy Dialogue (CPD).
The local think tank has been opposing such facility for a long period of time as they believe that such type of funding is nothing but wastage of public money.
It said recurrent recapitalisation of the SoCBs by the government has emerged as an issue of grave concern as the performance of the banks was not improving.
It also said that continuation of the practice will encourage irregularities in the banks.
The CPD in a recent media briefing said that without reducing the non-performing loans (NPLs), the capital adequacy cannot be improved since higher levels of NPLs lead to increased provisioning requirements, resulting in capital shortfall for the government banks.
Dr. Khondker Golam Moazzem, director (research) at the CPD, told the FE that revenue collection will be a great challenge for the government in a situation when business activities are in bad shape since March last.
"In such a critical situation, such allocation is not good news at all."
He said the NPLs remained too high in case of the SoCBs. "If they cannot be efficient, the performance will not improve".