Free services, related cost hold back Sonali Bank

Sonali Bank Ltd incurred a cumulative loss of Tk 182.53 billion in the last 13 years as the state-owned bank has to provide services free of charge or at low cost.

In 2021, the bank's loss was Tk 26.70 billion, its management said in a recent response to queries by the Ministry of Finance (MoF) about the losses the bank counts in providing services to people on behalf of the government.

The bank in a letter said it has to provide 37 types of services to people at no cost and 14 types at a nominal charge in line with the government's directives, but it has to employ manpower, pay establishment costs, purchase furniture, stationery items, and computers to provide the services.

The services include distribution of old-age allowance, widow allowance, disability allowance, salaries and wages of teachers and employees, salaries, wages and pension of government employees and members of the armed forces division, issuance of savings certificates in favour of jute mills workers, and payment of honorarium to the freedom fighters.

The bank also provides services like opening special letters of credit for the government, payment against savings certificates and investment bonds from the bank's own fund, adjusting regular loans of Bangladesh Petroleum Corporation (BPC) by issuing low interest bonds, and providing chest service.

The bank claimed that it is being deprived of a large amount of profit against providing these services which contributes to the capital shortfall, and comes as a barrier in attaining targets of the annual performance agreement signed with the government.

The bank said it was supposed to earn Tk 52.77 billion as commission against the letter of credit worth Tk 942.46 billion opened for the Rooppur Nuclear Power Plant project. But, the government has agreed to pay only Tk 200 million, depriving the bank Tk 52.57 billion, it said, explaining the reason why it had incurred such huge losses.

The letter also mentioned that the bank had issued bonds for the BPC in 2007 and in 2013 at 5.0 per cent and 7.0 per cent rate of interest respectively.

If the average rate of interest, 9.0 per cent, for six to 15-year government bonds is taken into consideration, the Sonali Bank will incur a loss of Tk 6.83 billion on maturity of the bonds.

Similarly, the bank said, it will incur a loss of Tk 2.04 billion against the bonds issued for Bangladesh Jute Mills Corporation at 5.0 per cent rate of interest.

The bank also expressed the fear that it would incur a loss of Tk 1.67 billion against special treasury bonds issued to provide loans and waive interest to two private entities.

The bank also pointed out that it has to keep a provision of Tk 18 billion throughout the year only to carry out the activities relating to the savings certificates. The bank pays Tk 1.26 billion annually to the depositors each year against the money that it does not get from the government.

It also said the bank needs to carry out various social safety net activities on behalf of the government and receive payment of utility bills where it has to employ a large number of employees that involves huge expenditure.

Contacted, a senior financial institutions division official told the FE that the Sonali Bank has been requesting the government since 2019 to pay commission against the services it provides to the public at no cost.

He said the division has been working on it and recently sought updated information about the losses the bank incurred in the recent years from these particular services it provides.

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