Fresh capital injection for public banks on cards04 August 2014 Kazi Zahidul Hasan
The government once again is going to inject fresh capital into the crisis-ridden state-owned banks to help them enhance the lending activity and meet the capital adequacy norms, official sources said on Sunday.
It will this time disburse Tk4000 crore to five public banks-- Sonali, Janata, Agrani, Rupali and Basic -- as part of the capital infusion programme.
"The funds would be disbursed to these public banks soon with applying stringent terms and conditions," a senior official of the Bank and Financial Institution Division (BFID) of Ministry of Finance told The New Nation yesterday.
He said, the government had already earmarked the amount in the Budget for the current fiscal.
"Capital infusion will be based on an assessment made by the BFID about the capital needs of public sector banks and the funds will be provided to them with in a phased manner tagging conditions of strengthening risk management mechanism in compliance with the central bank," he added.
Justifying the need for the bank's recapitalisation programme, he said, "These state-owned banks are now operating with huge capital shortfall resulted from recent loan scams and rising bad and defaults loans in their overall credit portfolios. This has led to weaken financial health of the banks, squeezing their ability to expand lending activities.
As the banks are facing huge capital shortfalls due to various scams last year, the IMF set a condition that public money will be injected into the banks only if they go through drastic reforms.
"The government wants to rescue the banks much before their crisis deepen further. And so on is going to give a fresh dose of capital injection to the banks to cushion the impact and sustain the lending growth," he added.
Earlier, the government had injected Tk 4,100 crore to the four state-owned commercial banks-Sonali, Janata, Agrani and Rupali--during the last fiscal year to help them meet their capital shortfalls enclosing conditions related to credit risk management.
"This time the government has also decided to provide funds to the scam-hit Basic Bank as its capital shortfall is highest among all the public banks which stands at over Tk1,000 crore," the BFID official said.
Basic, a state-owned specialized bank, had come under the spotlight since loan scams of Tk 4,500 crore were unearthed by the central bank investigation in between 2012 and 2013.
The BFID official further added that the authorities of BASIC Bank already sought funds from the government and it is actively considering their plea of providing fresh funds to the bank.
Replying to a question, he said, "The BFID is working sincerely to stop recurrence of financial irregularities in the public banks. As part of the efforts, it has already brought all the public banks under the close monitoring of the Division."
In order to improve their financial health and business expansion, it (BFID) is also reviewing their business plan earlier submitted by themselves. "We have sought the plan following detection of huge financial irregularities in the public banks," he added.