12 banks face Tk10,797cr provision shortfall

A dozen banks faced a combined provision shortfall of Tk10,797.87 crore in the fourth quarter of 2019, exposing their faltering financial health.

The banks are Sonali Bank, Agrani Bank, Rupali Bank, BASIC Bank, AB Bank, Bangladesh Commerce Bank, Dhaka Bank, Mutual Trust Bank, National Bank, Standard Bank, Social Islami Bank and Trust Bank. 

Experts said that some of the banks faced provision shortfall because they lent beyond limits set in banking regulations.

Talking to Dhaka Tribune, former governor of the Bangladesh Bank Salehuddin Ahmed said, “Provision shortfall is a bad sign for a bank, which indicates its weakness caused by fall in depositors’ funds.”

The capital base of those banks would erode significantly as they must keep provisioning as per the central bank rules, he added. 

As per central bank regulations, banks have to keep 0.50% to 5% provision with Bangladesh Bank against defaulted loans of general category, 20% against classified loans of sub-standard category, 50% against classified loans of doubtful category, and 100% against classified loans of bad or loss category.

The high amount of non-performing loans in the banking sector is largely responsible for the huge provision shortfall, say bankers. 

At the end of December last year, the amount of total non-performing loans in the banking sector stood at Tk94,331 crore, up by Tk420 crore from a year earlier, according to the central bank data. 

According to the central bank data, the Agrani Bank’s shortfall stood at Tk1442.95crore, BASIC Bank's at Tk3334.12 crore, Rupali Bank's at Tk878.34 crore and Sonali Bank's at Tk2156.51 crore during the period. 

The provision shortfall of AB Bank stood at Tk637.33 crore, Bangladesh Commerce Bank's at Tk538.03 crore, Mutual Trust Bank's at Tk275.24 crore, Dhaka Bank's at Tk425.93 crore, National Bank's at Tk487.32 crore, Social Islami Bank's at Tk296 crore, Standard Bank's at Tk161.91 crore and Trust Bank's provisioning deficit stood at Tk164.19 crore.