Provision made easy for banks
Obligations regarding provisions or security deposit have been made flexible for scheduled banks reportedly. From now on banks will not have to do provisioning from their profits against customers' bills and guarantees, relevant sources have informed.
Bangladesh Bank (BB) issued a circular in this regard on Thursday. Bangladesh Bank has stated that banks have to keep 1% provision in case of collecting bills on behalf of clients and giving bank guarantee to customers though it has been observed by the central bank that not being able to collect bills on behalf of customers is not a failure of the concerned banks.
If a customer fails to pay bills, its liability does not go on to the shoulders of banks. Keeping this in view provision for such things is no longer required, according to Bangladesh Bank. Provision has been made easier for bank guarantee too in the same way. Latest information from Bangladesh Bank shows that 12 banks have failed to keep provisions.
Out of this four are state-owned banks and eight are private banks. Provision deficit has amounted to 7 thousand 958 crore taka for this reason. At the end of January-March this year banking sector's required provision was 49 thousand 239 crore taka but banks have been able to keep 41 thousand 280 crore taka provisions.
At the end of December 2017 provision shortage was 9 thousand 375 crore taka. At that time 9 banks had provision crisis. Generally provision from 0.25% to 5% is required against loans. 20% provision is required for low quality loans, 50% provision is required for suspicious loans and 100% provision is required for loans which incur losses. Banks have to deposit this money from their profits.
Source: https://dailyasianage.com