CAPITAL SHORTFALL: State banks to get Tk 2,000cr

The government plans to set aside Tk 2,000 crore for state banks in the new budget for the coming fiscal year to meet up their huge capital shortfall.

The allocation was the same in the previous year, although the amount was Tk 5,000 crore in 2015-16 when Tk 1,800 crore was finally disbursed.

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The total budgetary expenditure for capital shortfall of such banks was over Tk 9,655 crore in five years from 2011-12. The seven state banks have total capital shortfall of Tk 13,977 crore as of March this year.

Among them, Agrani has capital shortage of Tk 442.63 crore followed by BASIC Tk 2,962 crore, Janata Tk 70.29 crore, Rupali Tk 637.88 crore, Sonali Tk 2,557 crore, Bangladesh Krishi Bank Tk 7,252 crore and Rajshahi Krishi Unnayan Bank Tk 778.78 crore, Bangladesh Bank data shows.

Overall capital of the banking sector rose slightly by 0.79 percent in the first quarter of 2017.  The capital surplus decreased to Tk 2,330 crore at the end of March from Tk 2,945 crore due to increase in capital requirement in line with Basel III standards, a international capital framework that introduced in January last year by Bangladesh Bank.

Most of the private banks except Bangladesh Commerce Bank and Investment Corporation of Bangladesh succeeded in the field as they initiated to raise capital to comply with the new capital framework.

The central bank last year took steps to improve banks' financial health by increasing their capital to risk weighted assets ratio (CRAR) in line with Basel III standards, introduced in January.

Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen regulation and supervision and reduce risks of the banking sector globally.

In March, the total capital in the banking system was Tk 84,424 crore, up from Tk 83,758 crore in December last year, according to Bangladesh Bank.

In March, the banks' average CRAR was 10.68 percent. This was 10.80 percent three months ago.

CRAR is a measure of a bank's capital and is used to protect depositors and promote the stability and efficiency of financial systems around the world. Last year, the central bank decided to implement the Basel III framework and conducted a quantitative impact study.

On the basis of the study, the BB also sent a roadmap to the banks on how they would implement the framework.

In four quarters from January 2016, the BB evaluated the banks' capital adequacy as per the Basel III standards.

Until December 31, 2015, the banks had to maintain their capital adequacy ratio at 10 percent of risk-weighted credit exposures. From 2016 to 2019, the banks will have to maintain their capital at 0.625 percent in addition to 10 percent as their CRAR.

In the first quarter of 2017, the CRAR of the private banks decreased to 12.22 percent from 12.36 percent in the previous quarter.

For the state banks, it increased to 5.92 percent from 5.86 percent.