The state-owned Sonali Bank has sought guarantee worth Tk 60 billion from the government to meet its huge capital shortfall urgently, officials said.
According to data available until September, Sonali Bank Ltd (SBL) had a capital inadequacy of over Tk 31.40 billion. And the current figure is assumed to have increased with the rise in its non-performing loans (NPLs)
Managing Director of the SBL Obayed Ullah Al Masud in a letter to the Ministry of Finance on March 4 made the request for a kiss of life to the bank, the sources said.
"We have sought from the finance ministry issuance of government's guarantee worth Tk 60 billion in favour of Somali Bank to reduce its capital shortfall. The bank needs fresh injection of a huge amount of funds immediately," a source in the largest state-owned bank told the FE Tuesday.
When contacted, a high official of the financial institutions and banking division said, "We have received the proposal sent by the bank, seeking funds to meet its capital shortfall."
Officials of the bank said it immediately would need recapitalisation to strengthen its capital base and maintain minimum capital requirement in line with Basel-III banking guideline.
When contacted, the bank MD said, "We have sought guarantee from the government. This is not traditional guarantee."
Mr Masud explained the guarantee term: the government will assure its guarantee and the central would raise the capital status as per Basel guideline.
Meanwhile, the SBL has sought commission on a hefty Tk 942 billion LC opened for importing equipment and services for the country's maiden Rooppur Nuclear Power Plant (RNPP) instead of providing fund from block allocation, according to the letter.
An official said a total of Tk 50 billion in commission comes usually through charging 0.04 per against the LC opening for RNPP project.
He, however, told The Financial Express if the government provides the actual commission instead of block allocation in line with the existing rules, the bank could get some Tk 50 billion from the project. In this case, he said, the government may not need to provide money for bank's recapitalisation.
The government has decided to provide Tk 200 million as block allocation as commission for the bank, he mentioned.
Currently, the bank provides 37 services free of cost to beneficiaries under the government safety-net programme while 14 services at nominal cost.
Besides, different types of pension schemes have been operated by the bank. The bank also lends to different problem-ridden state entities, including Bangladesh Jute Mills Corporation (BJMC), Bangladesh Agricultural Development Corporation (BADC) and Bangladesh Petroleum Corporation (BPC) in the national interest.
Later, the loans are adjusted through receiving 20/30- year-tenure bonds. For this, the SBL had to count a loss of Tk 10.60 billion every year, the letter reads.
Also, the Sonali Bank's financial strengths were weakened following some lending irregularities. Its Ruposhi Bangla Hotel branch lent Hall-Mark Group and five other companies Tk 39.88 billion between 2010 and May 2012 allegedly on forged documents.
The little-known big borrowers embezzled the whole amount that belongs to depositors, in collusion with some dishonest bank officials, according to sources concerned.
Of the total amount, Hall-Mark Group alone allegedly took away over Tk 29.64 billion, T and Brothers over Tk 7.37 billion, Paragon Group over Tk 1.61 billion, Nakshi Knit over Tk 799 million, DN Sports over Tk 382 million and Khanjahan Ali Sweaters over Tk 67 million.
In the middle of February last, the government moved to give funds for replenishing capital of the state-owned banks (SoBs) that suffered such cash crunch, officials said.
The financial institutions division (FID), under the ministry of finance (MoF), had held a meeting attended by managing directors of SoBs and representative of Bangladesh Bank. 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.
The Basel-III regulatory framework has raised capital-adequacy requirement for banks, which most SoBs fall short of.