A dozen banks faced a combined provision shortfall of Tk10,797 crore at the end of December 2019, thanks to their rescheduling-spree of bad loans in a bid to show their defaulted loans lower than the real figure.
The provision shortfall of 12 banks was around Tk12,000 crore at the end of September last year.
This time, Agrani Bank has got into the list afresh while Shajalal Islami Bank has come out of it, keeping the total number of banks suffering provision shortfalls unchanged.
However, after deducting surplus funds of a few lenders, the amount of provision deficit in the banking industry stood at Tk6,655 crore in December – down from Tk8,129 crore a quarter ago.
"Provision shortfall is an indication of worsening trend of the capital base in a bank," Dr Salehuddin Ahmed, a former governor of the Bangladesh Bank, told The Business Standard.
According to the central bank rules, a bank has to keep aside required provisions against classified and unclassified loans from their operating profits to mitigate financial risks and shield the interest of depositors.
Banks have to keep 0.50 percent to 5 percent provision against general category loans, 20 percent against classified loans of substandard category, 50 percent against classified loans of doubtful category, and 100 percent against classified loans of bad or loss category.
Experts said the central bank's relaxed policy for loan rescheduling has helped banks to get a breathing space for keeping provision, but at the cost of the depositors.
At the end of December, the lenders that faced the shortfall are: Agrani, Sonali, Rupali, BASIC Bank, AB Bank, Bangladesh Commerce Bank, Dhaka Bank, Mutual Trust, National Bank, Social Islami, Standard Bank and Trust Bank, according to the Bangladesh Bank data.
Some of these lenders have been facing the deficit for a long time as they had disbursed loans by flouting rules, said a Bangladesh Bank official.
"Shortfall can be temporary, arising from a unique set of circumstances, or it can be persistent, which indicates to poor financial management practices," said Salehuddin.
Experts said in many countries, provision shortfall is a breach of regulations, and lenders have to get punished for it.
But the Bangladesh Bank is yet to take any exemplary actions against the non-obliged banks, they said.
Rather, the lenders have managed to get time from the regulator to meet the shortfall in phases over a period of three to four years.
The amount of default loan was cut down to Tk94,331 crore in December from Tk1,16,288 crore in September last year, thanks to massive loan rescheduling on relaxed terms offered to clean up the bank books.
Syed Mahbubur Rahman, the managing director of Mutual Trust Bank, said he has been trying to improve his bank's asset quality and profits to meet the gap in provision shortfall.