Rejaul Karim Byron

The overall deficit in seven state banks, which stands at Tk 3,930 crore, has raised concerns at the policy level. The situation was discussed at a high-level meeting of the finance ministry yesterday where the banks were asked to cut bad assets.

The meeting also found that credit at four state-owned banks increased by 18 percentage points against deposit, for which the banks have been asked to launch more drives to collect deposits to restore a balance.

Top officials of the Bangladesh Bank and different public banks were present at the meeting chaired by Banking Division Secretary Shafiqur Rahman Patwari at the ministry's secretariat office.

According to the finance ministry, five banks -- Janata Bank, Agrani Bank, Rupali Bank, Krishi Bank and Rajshahi Krishi Unnayan Bank -- had a total capital deficit of Tk 5,287 crore. The deficit figure of Janata Bank reflects what it was on March 31, 2011 and the deficits of the rest banks were shown as of May 31, 2011.

Three banks -- Sonali Bank, BASIC Bank and Bangladesh Development Bank -- had a combined capital surplus of Tk 1,357 crore on May 31, 2011.

Till June 30, 2011 the banks were supposed to maintain 9 percent capital of their risk-weighted assets. But from July 1 they have to maintain 10 percent capital of such assets.

Risk-weighted asset means various types of bad loans with a bank. In banking terms loans are a bank's assets and deposits are its liability.

After July 1 the banks' deficit will rise further, said a high official of the finance ministry.

The official said the banks' capital deficit went up mainly due to an increase in the bad loans. Some of the five banks did not have any capital deficit on December 31 last year, rather they had surplus.

According to finance ministry statistics, in March 2011 Janata Bank's risk-weighted asset increased by Tk 3,000 crore compared to December 31, 2010.

The Agrani Bank's risk-weighted asset in May 2011 rose by more than Tk 1,000 crore compared to December 31, 2010. The amount was about Tk 1,800 crore for Rupali Bank in the period.

The finance ministry official said Krishi Bank and Rajshahi Krishi Unnayan Bank are not run only to serve commercial purposes. They have to provide loans to different sectors as per government directives.

However, the meeting directed the state banks to take all-out measures to cut their bad loans. The banks said the pace of disposing of cases against the defaulters is slow.

The meeting asked them to appoint efficient lawyers for quick disposal of the cases.

Another high official of the banking division told The Daily Star that last month they had to release about Tk 1,138 crore to meet the capital deficit of the state banks. They will repay the loans in 40 years.

The credit-deposit ratio of four state banks is within their limit -- 74 percent on June 23, 2011 -- but there is a lack of balance between their deposit and credit growths.

On average, the deposit growth of the four banks is 13 percent but credit growth is 31 percent in the same period.

State-owned BASIC Bank has been under government ownership from its start but it had been a good bank. The bank has no capital deficit but what has raised alarm is that its risk-weighted assets increased sharply.

On December 31, 2009 BASIC Bank's risk-weighted asset was Tk 3,185 crore which stood at Tk 5,703 crore on May 31, 2011.

Bangladesh Bank Deputy Governor Nazrul Huda was also present.

 News: TheDaily Star/ Bangladesh/ July-05-2011