Two more state-owned commercial banks (SoCBs) were included in the list of banks facing capital shortfall in the first quarter (Q1) of this calendar year.

With the latest two, the total number of banks facing capital shortfall, rose to nine in the Q1 from seven in the final quarter of last calendar year, according to the central bank's latest statistics.

Of the nine, five out of six SoCBs, two of 40 private commercial banks (PCBs) and two specialised banks (SBs) were included in the capital shortfall list.

"Those nine banks faced capital shortfall mainly due to their higher classified loans," a senior official of the Bangladesh Bank (BB) told the FE Monday.

The banks had kept aside more money from their capital for maintaining provisioning requirement against their non-performing loans (NPLs), the central banker explained.

The capital shortfall of nine banks stood at Tk 147.02 billion as on March 31 this year against Tk 147 billion three months ago despite a substantial decrease in a leading SoCB's capital shortfall, according to the BB officials.

The capital shortfall of the SoCB came down to Tk 25.58 billion in Q1 from Tk 34.75 billion in  Q4 of the last calendar year.

The central bank has already asked four SoCBs to take effective measures to meet their capital shortfall as early as possible.

"We've also advised the public banks to meet their capital shortfall through boosting their business activities across the country," another BB official told the FE while replying to a query.

Besides, the capital base of banks weakened during the period under review following higher growth of classified loans in the country's banking system.

The overall capital-to-risk weighted assets ratio (CRAR) of all the banks operating in Bangladesh came down to 10.68 per cent in Q1 from 10.80 per cent in Q4 of last calendar year, the BB data showed.

The CRAR was 10.62 per cent in Q1 of 2016.

The amount of classified loans in the country's banking system jumped by more than 18 per cent to Tk 734.09 billion during the January-March period of this year from Tk 621.72 billion in the preceding quarter.

All PCBs' CRAR was found on an average to be 12.22 per cent as on March 31 last while the CRAR of nine foreign commercial banks stood at 23.91 per cent.

"But it was the capital position of public banks which is a matter of grave concern," the central banker said while explaining the overall situation on the public banks.

The CRAR of six SoCBs stood at 5.92 per cent as on March 31 this year while the CRAR of two SBs were in negative territory at 35.23 per cent, the BB data showed.

However, the total regulatory capital increased by Tk 6.66 billion to Tk 844.24 billion during the January-March period of this calendar year from Tk  837.58 billion three months ago.

Bangladesh started implementing the Basel-III for calculation of CRAR of all banks from Q1 of 2015 for consolidating stability in the banking sector.

Under a roadmap to comply with the Basel-III, the banks will have to maintain 11.25 per cent of CRAR including 1.25 per cent capital conservation buffer by the end of December 2017.

The CRAR remains unchanged at 10 per cent while 0.625 per cent capital conservation buffer has to be included each year.

The banks will have to maintain 11.875 per cent CRAR by 2018. Finally in 2019, it will hit the desired level of 12.50 per cent, according to the roadmap.

The Basel-III is a new global regulatory standard on banks' capital adequacy and liquidity as agreed by the members of the Basel Committee on Banking Supervision.

The third of the Basel Accords was developed in response to deficiencies in financial regulation revealed by the financial crisis of late 2000s.

The Basel-III is set to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage.