Instead of improving, the financial condition of two specialized scheduled banks - Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) is deteriorating day by day due to capital shortage, accumulated losses, high defaulted loans, increasing expenditure and weakness in the internal control system, according to the Bangladesh Bank (BB) sources.
In this situation, the central bank of the country recently held a meeting on the June-based financial condition of the two banks. Various indicators presented in the meeting reflected this worsened situation.
In the meeting, BB Governor Ahsan H. Mansur gave some instructions including strengthening loan recovery from top defaulters.
The chairman and Managing Director (MD) of the two banks were present at the meeting, according to BB sources.
According to received information, BKB had a target of reducing high-cost deposits by Tk 5,621 crore as of June,; but it increased by Tk 3,877 crore. The bank's cost of funds was 8.10 per cent as of June 2023, which increased to 9.15 per cent in June 2024.
RAKUB was given a target to reduce high-cost deposits worth Tk 696 crore. The bank could not at all reduce it, but rather increased by Tk 107 crore. The bank's cost of funds was 8.35 per cent as of June 2023, which increased to 8.39 per cent in June 2024.
BKB was given a target to reduce non-performing loans (NPL) to 8 per cent as of last June. On the other hand, NPL's increased by 12.72 per cent, amounting to Tk 4,330 crore. RAKUB's target to reduce NPL's was 12 per cent. On the other hand, NPL's increased by about 16 per cent, amounting to Tk 1,242 crore.
The loan recovery rate from the top 20 defaulters and write-off defaulters of the two banks is also not satisfactory. According to the data, BKB and RAKUB had a target to recover Tk 179 crore and Tk 50 crore respectively from the top 20 defaulters as of June 2024. Tk 2.66 crore and Tk 24.64 crore were recovered respectively. However, the recovery situation from other defaulters (small and medium) is somewhat better. BKB has recovered Tk 687 crore against Tk 1,121 crore and RAKUB has recovered Tk 432 crore against Tk 450 crore.
In the last fiscal year, BKB's target for micro, small and medium (MSME) loan disbursement was Tk 7,813 crore. The bank has disbursed 61 per cent of the target. RAKUB's target was Tk 1,795 crore. On the contrary, the bank has disbursed 97 per cent.
According to the report, RAKUB's capital deficit stood at Tk 17,231 crore as of June 2024. It was Tk 15,741 crore in the same period in 2023. And RAKUB's deficit stood at Tk 2,467 crore as of June 2023. This deficit was Tk 2,414 crore as of June 2023. On the other hand, the capital adequacy ratio of both banks has also come down to negative levels. As of last June, BKB's CRAR stood at negative 54.95 per cent. RAKUB's was negative 25.33 per cent.
The interest income from RAKUB's loans is not enough to pay interest to depositors. As of last June, there has been a loss of Tk 447 crore in the interest sector. During this period, Tk 2,304 crore was earned as interest, but depositors had to pay Tk 2,751 crore as interest. Accumulated losses have increased due to negative net interest income.
At the end of June, BKB's loss stood at Tk 16,664 crore. It was Tk 15,115 crore in the same period in 2023. On the other hand, RAKUB's net interest income till last June was Tk 271 crore. The bank's loss decreased from Tk 2,690 crore to Tk 2,689 crore.
Meanwhile, the central bank has been urging BKB and RAKUB to reduce their fund costs. For this, a target was also set to reduce high-cost deposits. But the high-cost deposits of the two banks increased further. Along with this, the fund costs also increased.
BKB was established in 1973. It was originally established with the aim of providing loans for the development of crops, fish and livestock. However, after 2010, it deviated from that goal and started full-fledged commercial banking; it got involved in various irregularities and corruption.
RAKUB was established in 1986 by dissolving Bangladesh Krishi Bank. Its journey began with the branches of the Rajshahi division of Krishi Bank. Like Krishi Bank, RAKUB also made various irregularities in loan disbursement after 2010. Adequate collateral was not kept against these loans. As a result, there was no success in recovering the loans.
It is known that the central bank sets targets for various indicators every year under the Memorandum of Understanding (MOU) to improve the situation of the two banks. But they have always shown failure to achieve the targets. In this reality, BB announced the merger of the two banks in April last year. However, in the end, that initiative did not see the light of day. Although the mobile phone of the MD of BKB was called several times to get a statement on this matter, he did not answer.
