The government intends to provide the state-owned banks with another recapitalisaiton fund of Tk2,000 crore in the next fiscal year to meet the capital shortage created by the loan defaults, said a source in the Finance Division recently.

The same amount of money was allocated for the state banks to meet their capital shortage in the current fiscal year.

BASIC Bank gets Tk1,000 crore from the allocation in the revised budget.

Earlier, the government decided to provide Tk1,000 crore to BASIC Bank this fiscal year to improve clients’ trust which was damaged by massive loan irregularities.

According to official sources, Finance Division wanted to merge BASIC Bank and Sonali Bank, but the government high-ups declined the proposal.

“Finance Division recommended merger of BASIC Bank and Sonali Bank. But the government high-ups didn’t go that way. So, the next fiscal year’s allocation (for recapitalisation of state banks) will be same as the current fiscal year,” said an official at the Finance Division.

The two state-owned financial institutions and private IFIC Bank are going to get recapitalisation funds in the revised budget of fiscal year 2016-17.

Only Tk365.50 crore is left for recapitalisation which is likely to be disbursed among six state-owned banks suffering capital shortfalls, including Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Sonali Bank.

Probashi Kallyan Bank will get Tk250 crore while Bangladesh House Building Finance Corporation Tk200 crore.

The Finance Ministry will provide Tk184.65 crore for IFIC as the private commercial bank which earlier decided to increase paid-up capital through issuance of rights share after considering bonus shares for stock dividend.

After last recapitalisation meeting on BASIC Bank at the Finance Division, Finance Minister AMA Muhith said the government would treat BASIC Bank with special care to help it meet capital shortfall.

He said the bank needs “special nurturing” as its condition is not normal now.

“It cannot be compared with other banks,” he said, adding that the Finance Ministry thinks that without recapitalisation, BASIC will not be able to do business.

BASIC Bank is running its Letter of Credit (LC) business with the help of Sonali Bank.

The bank received Tk2,390 crore from the budget allocation under the government recapitalisation programme in the last five years.

According to the Finance Division working papers, the capital shortfall of the BASIC Bank is Tk1,934.5 crore while the capital reserve ratio was only 7.55% in 2015.