Govt doles out Tk 20b to recapitalise banks

The government will give Tk 20 billion in a latest dollop to state-run banks to meet their capital shortfall, officials said, at a time when reports are rife on irregular big lending.

The funds are set to be handed out to seven financial institutions --- three state-owned banks (SoBs), three specialised banks and the restructured Grameen Bank (GB) --- the sources said.

The money will be made available from a Tk 20-billion fund earmarked in the 2017-18 budget for recapitalisation of banks. 

The financial institutions division (FID) under the ministry of finance sent a proposal in this regard to the finance minister for approval, despite criticisms about giving taxpayers' money for so-called recapitalisation of banks time and again.

The minister gave the seal of approval on the proposal on March 7, a source concerned said.

Some Tk 4.0 bilion, Tk 4.0 billion, Tk 3.0 billion, Tk 3.0 billion, Tk 4.0 billion, over Tk 1.997 billion and Tk 2.1 million will go into the coffers of Sonali Bank, Janata, Rupali Bank, Basic, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank (RAKUB) and Grameen Bank (GB) respectively from the budget cake kept for banks, according to finance ministry data.

The amount provided to banks is equivalent to10 per cent of the total capital shortfall of the banks for this year. In this regard, it will make a plan as early as possible, according to a senior official of the division.

"We have given allocation from the recapitalisation fund to the SoBs and other agencies," said a high official of the finance ministry.

Earlier, Bank and Financial Institutions Division (BFID) had sent the proposal for recapitalising the state-run banks and Grameen Bank.

However, the authorities of the banks are not satisfied with the amount of government allocation as they are running their banking operations with substantial capital shortfall in recent days, sources concerned in the state banks said.

Recently, the state-owned banks sought an aggregate amount of Tk 203.98 billion to replenish their emaciated capital.

According to the proposal, some Tk 60 billion, Tk 25 billion, Tk 12.50 billion, Tk 25 billion, Tk 73.48 billion, Tk 8.0 billion and Tk 2.1 million have been sought by Sonali Bank, Janata, Rupali, Basic, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank (RAKUB) and Grameen Bank (GB) respectively from the budgetary fund.

On February 14, 2018, the government moved to give funds for replenishing capital of the banks that suffered such cash crunch, officials said.

The financial institutions division, under the ministry of finance (MoF), had held a meeting, attended by managing directors of SoBs and a representative of Bangladesh Bank, on the matter. Secretary of the financial institutions division Eunusur Rahman chaired the meeting.

The government had earmarked Tk 20 billion as budgetary allocation for recapitalising the banks in need in the current fiscal year.

The Basel-III regulatory framework has raised capital-adequacy requirement for banks, which most SoBs fall short of.

The funds will be fed to banks to meet the Basel-III requirements mostly, said a source.

"We have sought guarantee from the government. This is not traditional guarantee, Managing Director of the SBL Obayed Ullah Al Masud told the FE last Friday.

"We had sought an allocation of Tk 25 billion from government for BASIC to reduce its capital shortfall. A huge amount of funds is an urgent need for the bank," a senior official of the problem-ridden bank told the FE.

"We have heard that Tk 20 billion was allocated for the state banks last week which is a nominal amount for the banks," he added.

"Recently, we have got the proposal sent by state-owned banks seeking funds to meet their capital shortfall from the government fund," a senior official of the banking division said.

The government had injected Tk 106.22 billion into the coffers of the state banks, the House Building Finance Corporation, private IFIC bank and Grameen Bank between the fiscal years (FYs) 2012-13 and 2016-17.

In the period, the scam-ridden BASIC Bank got the highest amount of Tk 33.90 billion as it stood hollowed for fraudulent lending that led to its management shakeup.

Sonali Bank got the second-highest amount of Tk 30.05 billion while Tk 10.81 billion went to  Agrani bank,  Tk  8.14 billion to Janata, over Tk 7.29 billion to Bangladesh Krishi Bank, Tk 3.10 to Rupali Bank, Tk 3.10 billion to Rajshahi Krishi Unnayan Bank, Tk 4.0 billion to HBFC, Tk 1.78 billion to Sonali Bank (UK), Tk 1.25 billion to Palli Sanchaya Bank, Tk 250 million to Karmasangsthan Bank, Tk 1.85 billion to IFIC Bank, Tk 500 million to Ansar-VDP Bank  and Tk 196 million to Grameen Bank,  according to the financing proposal.

Finance Minister AMA Muhith told Parliament on February 26 last that four SoBs-Sonali Bank, Rupali Bank, Janata Bank and Basic Bank- were facing a capital deficit of Tk 76.26 billion.

As of September 2017, Sonali had a capital shortfall of Tk 31.40 billion (3,140.41 crore), BASIC Bank Tk 25.22 billion, Janata Bank Tk 12.72 billion and Rupali Bank Tk 6.89 billion.

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