Rupali Bank to issue Tk1,200cr bond to meet capital shortfall

Rupali Bank Limited – a state-owned, publicly traded commercial bank – is going to issue a bond worth Tk1,200 crore to meet its capital shortfall.

The bank is facing a capital shortfall of over Tk2,500 crore as it failed to maintain required capital, and the bank was burdened with over Tk7,500 crore classified loan as of March, 2023.

In this situation, the lender has decided to issue the bond for strengthening its regulatory capital base, and secured no objection certificate of the Bangladesh Bank (BB).

Now, it needs the consent of the Bangladesh Securities and Exchange Commission (BSEC) to issue the bond.

Kazi Sanaul Hoq, chairman of Rupali Bank, told The Business Standard, "The Tk1,200 crore fund through bond issuance will help the bank to meet its capital shortfall."

The board of directors had agreed on the bond's issuance in November 2022.

According to the bank's stock exchange filing on Thursday, the nature of the bond bank will be unsecured, non-convertible, and fully redeemable floating rate subordinated, and the tenure will be seven years.

According to Bangladesh Bank data, Rupali Bank has disbursed loans of Tk41,212 crore while the defaulted loans stood at Tk7,585 crore at the end of March, which is 18.41% of the total disbursed loans.

Based on this year's March data, the bank has to maintain Tk4,706 crore as required capital, but it maintained Tk2,131 crore. So, there is a shortfall of Tk2,575 crore capital.

At the end of April, the default loan amount rose to over Tk10,000 crore.

According to a Rupali Bank report, the total amount of the bank's default loans stood at Tk10,580 crore at the end of April 2023, and Tk7,794 crore of this massive default loan is stuck with 100 big borrowers.

So, around 78% of default loans in Rupali Bank are concentrated on its top 100 borrowers, putting the state-owned bank's financial stability and profitability at risk.

According to its latest annual report, the bank has reported a profit of Tk28 crore in 2022, and decided not to pay any dividends to its shareholders.

In the first quarter of 2023, the bank reported a 46% higher total operating income of Tk406 crore, compared to the same quarter previous year, thanks to its commission, exchange and brokerage incomes.

Its net profit grew by 14% year-on-year and stood at Tk66.2 crore at the end of the first quarter of 2023.

Rupali Bank's shares, having the face value of Tk10 apiece, were stuck at the floor price of Tk25.2 on Thursday at the Dhaka Stock Exchange.