Govt hints loss-making state banks may be privatised

The continuous losses of state-run banks prompted the government to consider privatising them all, expect one, said officials yesterday.

The issue of sustaining the taxpayer-funded lenders was discussed at a meeting in the presence of Finance Minister AMA Muhith, managing directors of all the seven state banks, governor of Bangladesh Bank, and the finance and banking secretaries. They reflected upon the capital shortfall of five state-run commercial banks and two state-run specialised banks.

After the meeting, Muhith told reporters, “Every government-run bank is weak. Every bank has some shortfall whether it is in case of capital or provisioning.”

Last year, six state banks logged operating profits of Tk 2,010 crore, down 37 percent from a year ago.

After provisioning and tax payments, the state banks registered a net loss of Tk 511 crore for the year, which was Tk 125 crore in 2015.

Two other state-owned specialised banks -- Krishi Bank and Rajshahi Krishi Unnayan Bank -- counted Tk 418 crore in losses last year, against Tk 167 crore in 2015.

Privatising the state banks has been a long-standing demand of the experts.

Last year, Mohammed Farashuddin, former central bank governor, and Sadiq Ahmed, former director, called on the government to immediately privatise the state banks and take drastic measures against public enterprises to stop them from bleeding the economy.

While talking to the media yesterday, the finance minister mostly discussed BASIC Bank.

Muhith said the government would nurse BASIC Bank differently, as its problems are different from that of the other state-run banks.

“BASIC Bank has become a special institution. It will be treated as a sui generis [unique] case in order to improve its condition.”

When the government discusses the banking sector, BASIC Bank would be out of the purview, he said. The bank will be given time to return to the group of the other state-run banks, he added.    

At the meeting, Khondoker Md Iqbal, chief executive of BASIC Bank, made a presentation on the bank's current situation and the steps it has taken so far.

The bank needs capital to facilitate international trading of clients, he said. The bank made nearly Tk 9 crore in profits last year, he added.

Muhith said the bank has made some positive changes after the present management took over.

“It has identified the borrowers who have borrowed money from the bank and the types of outstanding payments. Identifying them was a difficult task.”

Muhith said the bank has sufficient information on the debtors and the size of their debt. But it is not clear what the government will do about it. “We will have to ascertain it.”

On the capitalisation demand from BASIC Bank, Muhith however said, “It is impossible. It can't be. The capitalisation of a bank this size can't be what they are asking for.” “We will have to think how its requirement can be met in a different way,” he said, adding that the finance ministry would come up with recommendations for BASIC Bank.

BASIC Bank has a capital shortfall of Tk 2,684 crore.  The government would allocate Tk 2,000 crore next month as budgetary support set aside for all state banks in the current fiscal year to help them meet capital shortfalls.

On punishing the bankers involved in the irregularities at BASIC Bank, the minister said, “The Anti-Corruption Commission has documents about it. It will take steps as per its laws.”

The minister also said taxpayer money going to BASIC Bank is not being thrown away.

The meeting also discussed whether the state banks have the power to issue bonds and whether they have the capacity to do so. The minister said it will have to be further considered before a decision is taken on it.