Three state banks will issue different types of bonds worth 4 100 crore Tk to deal with a huge capital shortage.
The Central Bank has already given its primary consent to Bank BASIC, Bank Janata and Bank Rupali with certain conditions, in order to help them improve their financial health.
BASIC Bank will issue cashless bonds of 2,600 crore Tk – for the first time in the country's banking sector – which will only be used to show the financial health of the bank as strong, said an official of the Ministry of Finance .
Against the bond, BASIC Bank interest free Capital Bond, the bank can not raise money from the
The government 's responsibility is that if the bank folds, it will have to repay the money on behalf of BASIC Bank. The Ministry of Finance has agreed to the issuance of a ten – year Tk 800 bond issue, a 15 – year cash loan Tk 800 and a 20 – year loan Tk 1000.
Although the type of link that BASIC wishes to issue is new in Bangladesh, it was published in Asia before.
During the Asian economic crisis of 1997, Thailand, Malaysia and China issued such bonds to enable their financial institutions to function properly, added the official of the Ministry of Finance.
In 2009, when Abdul Hye Bachchu was appointed president of BASIC Bank, the financial situation of the bank began to deteriorate due to various scams.
Despite initiatives to improve his financial health following the appointment of Alauddin A Majid as president in July 2014, the bank still suffers from a huge capital deficit and increases loans ranked
The government provided BASIC Bank Tk 2,600 crore in phases. As of December 31 of last year, the bank's capital shortfall was Tk 2,684 crore.
The bank's non-performing loan (NPL) was Tk 7,229 crore, which is 54 percent of its total outstanding loans as of December 31 last year. The NPL of BASIC was Tk 6,392 crore a year ago.
On the other hand, Janata and Rupali will issue subordinated bonds worth 1,000 crore Tk and 500 crore respectively, said an official of the Bangladesh Bank
Subordinated debt is a loan or security that ranks below other loans and securities with respect to claims on the assets or profits of a business. It is more risky because it is paid after all other debts are repaid, in case of default of the borrower.
Against this link, both banks can raise money in the market, but they must invest money in profitable sectors.
Janata Bank's capital shortfall is Tk 73 crore, with a capital-to-risk ratio (CRAR) of 10.19 per cent, which must be greater than 10.6 per cent.
The capital deficit of Bank Rupali is Tk 714 crore, with a CRAR of only 5.88 percent.