Banks' operating profit not so real
Provisioning, tax erode as much as 76pc of it
Rejaul Karim Byron
Tax and provisioning of classified loans eat up as much as 76 percent of the operating profits of private commercial banks (PCBs).The banks clocked a net profit of Tk 426 crore in 2003 after tax and provisioning, which is to be split among the shareholders, according to a report of the central bank placed before the parliamentary standing committee on finance ministry yesterday. The banks however made an operating profit of Tk 1,790 crore in the same year, but as little as 24 percent of the operating profit end up in the pockets of the shareholders. Capital deficit, classified loan provisioning and tax gobble up the rest. Of the 31 banks, one also counted Tk 39.33 crore in losses while another made no profit. Eight private banks currently have capital shortfall, prompting the Bangladesh Bank (BB) to ask them to cover the deficit by March next year. The classified loans of the PCBs total 12.43 percent, but seven banks have more than 20 percent of such loans. The Securities and Exchange Commission recently asked the banks not to go public with the figures of their operating profits as these confuse the shareholders. Bangladesh Bank Governor Fakhruddin Ahmed yesterday placed a report on the state of the PCBs at the standing committee meeting, presided over by Mushfiqur Rahman. Most of the managing directors of the PCBs were present. The governor urged the PCBs to increase farm loans noting that the loan portfolio of the PCBs for the agriculture sector was a meagre 0.61 percent or Tk 225 crore of a total of Tk 37,241 crore last year. Business sector was the highest recipient of bank loans with 47.57 percent, followed by working capital with 17 percent, industries 14 percent, construction 9 percent, transport and communications 2.25 percent and others 9.43 percent. The PCBs blamed the poor farm loan disbursement on the condition set by the BB on the opening of branches in rural areas and urged the standing committee to move for its withdrawal. The governor also told the meeting that the tightening measures of the central bank have helped the PCBs perform better. He however noted that interest rates on loans have been cut by 1 to 2 percent, but further rate cuts are needed.
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