Four state banks' capital recovery action plans unrealistic: Cenbank
The six state banks collectively face a significant challenge, with four of them reporting a combined capital shortfall of Tk31,000 crore as of December 2024. The central bank had instructed them to submit a five-year plan to rectify the deficit by 2029
Highlights:
- Bangladesh Bank rejects four state banks' "unrealistic" capital recovery plans.
- Four banks face Tk31,000 crore combined capital shortfall in 2024.
- Agrani and BASIC proposals unrealistic amid heavy losses and huge deficits.
- Janata projects rising capital shortfall despite continued large yearly losses.
- Rupali, Sonali, BDBL submit more modest, achievable improvement targets.
- Experts urge deep reforms as sector-wide shortfall hits Tk1.55 lakh crore.
The Bangladesh Bank has rejected the capital recovery action plans of four state-owned commercial banks – Agrani, Janata, BASIC, and Rupali – labelling their proposals to address a massive capital shortfall as "unrealistic."
The six state banks collectively face a significant challenge, with four of them reporting a combined capital shortfall of Tk31,000 crore as of December 2024. The central bank had instructed them to submit a five-year plan to rectify the deficit by 2029.
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The other two banks – Sonali and Bangladesh Development Bank Ltd (BDBL) – faced a provisioning shortfall of Tk4,763 crore. Owing to provision forbearance, however, Sonali and BDBL reported a capital surplus of Tk167 crore.
Questionable targets
Agrani Bank's action plan proposes reducing its capital deficit by Tk6,245 crore within five years – despite posting a net loss of Tk937 crore in 2024. Between 2022 and 2024, the bank recorded net profits in only two years, totalling just Tk180 crore, before plunging into negative territory last year.
Bankers note that a bank may address its capital shortfall by increasing net profit, securing government recapitalisation, or sharply reducing non-performing loans (NPLs). "None of these factors is currently favourable for Agrani," a senior official said, adding that its plan was therefore far from realistic.
The central bank has returned Agrani's action plan, asking for a revised version aligned with financial realities. Agrani's own data show that against a Minimum Capital Requirement (MCR) of Tk9,444 crore at the end of 2024, it held only Tk1,752 crore – leaving a capital shortfall of Tk7,692 crore.
Despite this, the bank proposed a steep recovery path: reducing the deficit by Tk3,140 crore in 2025, Tk523 crore in 2026, Tk1,301 crore in 2027, and Tk1,680 crore in 2029, while acknowledging an additional Tk400 crore deficit in 2028.
Agrani also faces a provisioning shortfall of Tk12,790 crore, which it claims will bring down to Tk1,267 crore by 2028 and eliminate entirely by 2029.
The bank's managing director, Md Anwarul Islam, said they had shared a detailed plan with the Bangladesh Bank but declined to comment further.
BASIC Bank, with a capital deficit of Tk8,621 crore as of December 2024, projected that it would reduce the shortfall to Tk3,257 crore by 2029. This would require an improvement of Tk5,364 crore over five years – despite the bank having posted consecutive net losses of Tk130 crore, Tk416 crore and Tk863 crore in 2022, 2023 and 2024, respectively, and a further negative Tk577 crore up to June this year.
BASIC Bank Managing Director Md Quamruzzaman Khan said the bank was preparing a "realistic roadmap" to restore profitability, rebuild depositor confidence, and reduce classified loans. He noted that rumours of a merger in 2024 had temporarily driven deposits down, but the new board appointed in November had since been working to restore confidence.
Janata Bank's plan states that its capital shortfall will increase from Tk10,700 crore to Tk20,600 crore by 2029, while provisioning shortfall will fall from Tk47,300 crore to Tk30,240 crore. However, the bank reported a net loss of Tk3,071 crore in 2024 and another Tk3,000 crore in the first half of 2025, calling its projections into question.
The bank did not provide comments despite repeated requests by TBS.
Rupali Bank, with a capital shortfall of Tk3,970 crore, submitted a modest and realistic plan, projecting the deficit will reduce to Tk2,991 crore by 2029. The bank also plans a very limited reduction in provisioning shortfall – from Tk12,014 crore to Tk11,600 crore. Rupali has recorded net profits totalling Tk83 crore over the past three years.
Sonali Bank reported a capital surplus of Tk64 crore at end-2024 and aims to expand it to Tk5,842 crore by 2029. The bank also plans to turn its Tk4,632 crore provisioning shortfall into a surplus of Tk831 crore within the same period. Sonali has remained profitable for three consecutive years, earning Tk1,888 crore in total since 2022.
BDBL currently has a capital surplus of Tk103 crore, which it expects to increase to Tk397 crore by 2029.
Experts call for comprehensive balance sheet reforms
Economists argue that profit growth alone will not resolve the sector's structural weaknesses. They call for comprehensive balance-sheet restructuring, stronger risk management and aggressive NPL recovery. Proposed measures include government recapitalisation, setting up specialised recovery teams, fast-tracking legal cases, asset sales, and wider use of One-Time Settlement schemes.
Additional steps recommended include asset revaluation, reduction of the Loan Loss Provisioning burden, issuing AT1 or Tier-2 bonds, operational cost cuts, branch rationalisation and boosting fee-based income.
Total capital shortfall hits Tk1.55 lakh crore
The banking sector's combined capital shortfall rose to more than Tk1.55 lakh crore as of June this year, up sharply from Tk1.10 lakh crore in March. According to the Bangladesh Bank, 24 of the country's 61 banks – including four state-owned commercial banks, two specialised banks and 18 private banks – have failed to meet minimum capital requirements.
