Fourteen banks, including six state-run ones, faced a record capital shortfall in the third quarter of 2023, an indication of their fragile financial health caused mainly by a lack of governance. 

They are Agrani Bank, BASIC Bank, Janata Bank, Rupali Bank, Bangladesh Commerce Bank, Bengal Commercial Bank, Citizens Bank, ICB Islamic Bank, National Bank, Padma Bank, Habib Bank, National Bank of Pakistan, Bangladesh Krishi Bank, and Rajshahi Krishi Unnayan Bank.They clocked a collective capital shortfall of Tk 37,506 crore in the quarter that ended on September 30,  shows data from Bangladesh Bank.

September's figure was the highest shortfall and the previous high of Tk 33,744 crore was registered in the last quarter of 2021.As per Basel III, which is the international regulatory framework for banks, the minimum capital adequacy ratio (CAR) is 10.5 percent with an added 2.5 percent conservation buffer. The 14 banks failed to maintain the minimum CAR.

In September, the banking sector's CAR was 11.08 percent.In fact, Bangladesh's banking sector has maintained the lowest CAR in South Asia, according to the central bank's Financial Stability Report 2022. In July-September, a majority of the 14 banks witnessed a widening of capital shortfall and four new faces were added to the chart with the deficit.

The four banks are Bengal Commercial Bank, Citizens Bank and the local operations of Pakistan's Habib Bank and National Bank of Pakistan.

Bengal Commercial Bank posted a capital shortfall of Tk 70.70 crore in September. It was Tk 87.93 crore in June.Citizens Bank had a capital shortfall of Tk 95.37 crore, down from Tk 97.10 crore three months ago.

Both banks blamed the new central bank requirement of a minimum paid-up capital of Tk 500 crore from Tk 400 crore previously for the shortage.A senior official of Bengal Commercial Bank says it would not have faced any shortfall had the capital requirement was not raised.

The shortfall at Habib Bank and National Bank of Pakistan was Tk 33.40 crore and Tk 43.65 crore, respectively.Bangladesh Krishi Bank has kept posting the highest capital shortfall as it rose to Tk 15,803 crore from Tk 15,540 crore.Md Shawkat Ali Khan, managing director of the state-run lender, blamed non-performing loans for the shortfall.

"Now we are trying to reduce the volume of our bad loans. Once we are able to cut bad loans, our capital shortfall will decline."Agrani's capital shortfall rose 28.15 percent to Tk 4,828 crore in the three months to September, while BASIC and Janata Bank's deficit widened to Tk 3,150 crore and Tk 3,029 crore, respectively.

Rupali's fund shortage amounted to Tk 2,121 crore and it was Tk 2,472 crore for specialised lender Rajshahi Krishi Unnayan Bank.Agrani's former managing director Mohammad Shams ul Islam said that state-owned banks provide a large number of services to the general people and the government free of cost.

"If the banks claim fees for those services, there would be no capital shortfall."He suggested the government and the central bank find a way to meet the shortfall.

In a positive development, Sonali Bank came out of the shortfall zone in the third quarter.Central bank figures showed that private banks National and Padma's shortfall rose to Tk 2,024 crore and Tk 607 crore, respectively.

The capital deficit at Bangladesh Commerce Bank rose to Tk 1,402 crore. ICB Islamic Bank had a shortfall of Tk 1,823 crore.Bankers say the growing NPL is one of the major reasons for the capital shortfall at the banks. In September, the banking sector's NPL stood at Tk 155,397 crore, according to the BB.