All of the seven state-owned banks (SoBs) are facing capital shortages worth a total of Tk 150 billion, landing them in problem in operating business at home and abroad, sources said.
As of last December, Sonali Bank had a capital shortfall of Tk 26 billion, Janatal Bank Tk 6.64 billion, Agrani Bank Tk 2.0 billion, Rupali Bank Tk 10 billion, BASIC Bank Tk 22 billion, Bangladesh Krishi Bank Tk 74.85 billion and Rajshahi Krishi Unnayan Bank Tk 7.05 billion.
Official sources said Janata Bank, Rupali Bank and BASIC Bank had applied to the Ministry of Finance (MoF) for permission to issue bond to make up for capital shortages. Issuance of bond against BASIC Bank's capital shortage is now under scrutiny of the Finance Division while the central bank's opinion has been sought about the plea of Rupali and Janata Banks.
To take decision on ways of resolving the capital shortage of the SoBs, Finance Minister AMA Muhith will sit next Sunday with chief executives of the banks, the central bank governor, the finance secretary and the secretary of the Banks and Financial Institutions Division.
According to a Banking Division memo, the capital shortages of the banks can be recouped through four ways---injecting cash directly or issuing shares, by issuing bonus shares after earning net profit, reducing provision shortfall by lowering classified loans, and by issuing bonds.
Officials said in each fiscal budget the government keeps Tk 20 billion for recapitalisation of banks. So, the Tk 150 billion shortage cannot be met from the budgetary allocation.
They said meeting capital shortage through issuing bonus shares after earning net profit is a most rational process. But the SoBs are not making net profit for a long period. So, this process, too, is not applicable.
Classified loans are one of the main reasons of capital shortage. A bank can reduce provision shortfall by lowering classified loans, which helps in reducing capital shortage. But the SoBs are now reeling from burdens of classified loans having risen to Tk 621.72 billion in December last, they pointed out.
The other option the officials suggested is issuing bond by the government for recapitalizing the capital-deficient banks.
If bond is issued, said one finance official, the government wouldn't have to make any cash payment to the banks. But if the banks fail to pay back the money to the bond buyers on their maturity, the ultimate responsibility will go to the government.
Talking to the FE Monday, Banking division secretary Eunusur Rahman acknowledged that banks are facing large capital shortages.
He said a meeting will be convened soon where decision will be taken how to meet the shortages.
Asked whether the BASIC Bank is getting permission to issue bonds to meet capital shortage, he said: "It is not clear yet. The meeting will take decision in this regard."