8 banks’ provision shortfall over Tk 26,000cr
Eight banks, including five private commercial ones, had faced a provision shortfall of Tk 26,134.75 crore in total at the end of June this year, an indication of their fragile financial health.
The eight are Agrani Bank, BASIC Bank, Rupali Bank, National Bank, Dhaka Bank, Bangladesh Commerce Bank, Standard Bank and NCC Bank, according to Bangladesh Bank.
National Bank, a private commercial lender, faced the highest shortfall, Tk 11,682.52 crore.
Banks have to keep 0.5 to 5 per cent of their operating profit in provisioning against general category loans, 20 per cent against classified loans of substandard category, and 50 per cent against classified loans of doubtful category.
The lenders also have to set aside 100 per cent provisioning against classified loans of bad or loss category, as per the central bank rules.
Provision shortfall occurs when a financial obligation exceeds the amount of cash available. It can be temporary, arising out of a unique set of circumstances, or persistent, indicating poor financial management practices.
The provision shortfall is an ominous sign as it reflects the banks' weak financial health and it is largely an outcome of high non-performing loans (NPLs), according to industry insiders.
At the end of June of this year, the NPLs in the banking sector amounted to Tk 1,56,039 crore or 10.11 percent of the total disbursed loans, as per the central bank's latest data.
Till March of this year, it was at Tk 1,31,620 crore.
Meanwhile, the banking sector's overall provision shortfall till June was Tk 21,464.35 crore, lower than that of the eight, as some banks had kept a provision surplus, as per the central bank's data.
The overall provision shortfall was at Tk 16,298.90 crore till March.
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