State-owned Rupali Bank PLC has fallen into a major financial and structural crisis. High classified loans, a substantial provisioning shortfall and a large net loss in the first half of this year have put the bank’s financial capacity to the test. However, citing the bank’s large deposit base and strong liquidity position as a foundation for recovery, the government has issued a specific five-point directive to help turn the bank around.
These directives include increasing actual cash recovery instead of relying on account adjustments, reducing high-cost deposits, converting digital services into efficiency gains, and building the bank into a strong, profitable institution through good governance and accountability.
At a recent exchange-of-views meeting with the bank’s board of directors, chaired by the secretary of the Financial Institutions Division, detailed discussions were held on Rupali Bank’s overall financial condition, defaulted-loan recovery, capital, profit, liquidity, governance and implementation of decisions. According to a review of the meeting minutes, the bank was issued these directives at that meeting.
The meeting was told that Rupali Bank’s classified loans stood at 19,380 crore taka at the end of July this year, or 37.15% of total loans. However, with the overall default-loan ratio at 62.50%, the gap between the two figures is about 13,220 crore taka. The bank also faces a provisioning shortfall of 14,014 crore taka, a capital shortfall of 5,232 crore taka, a capital adequacy ratio of just 1.70%, and a net loss of 643 crore taka in the first six months of this year. As of July, the bank’s total assets stood at about 86,590 crore taka, deposits at 72,405 crore taka, and loans and advances at 52,159 crore taka.
In this situation, the Financial Institutions Division has advised prioritizing the improvement of loan quality over asset growth. It also called for carefully considering customers’ cash flow, repayment capacity, group lending, beneficial ownership and sector-based risk when disbursing new loans.
The meeting was also told that although the bank has 8.225 million deposit accounts, the share of low- or no-cost deposits has fallen to 41%, while the average cost of funds has risen to 8.62%. A major reason for this is the withdrawal of about 7,000 crore taka in low-cost deposits by the Bangladesh Petroleum Corporation. As a result, the bank was directed to increase stable, low-cost deposits by expanding current and savings, salary-based, remittance-linked and digital accounts, and to reduce reliance on large institutional depositors.
Although the loan-deposit ratio stands at about 72%, the meeting noted that aggressive lending is not the solution. About 57% of total loans are concentrated in the industrial sector, with large sums concentrated among the top 20 borrowers. Emphasis was placed on reducing this concentration in large corporate loans and increasing quality lending to small and medium entrepreneurs, agriculture, women entrepreneurs and productive sectors.
The bank said it aims to bring its classified-loan ratio below 20% by this December. The meeting urged that, in pursuing this goal, actual cash recovery and overall impact be evaluated separately, rather than relying solely on account adjustments or temporary rescheduling.
A plan has been adopted to restructure the bank’s financial framework within the next 12 to 24 months, built on five key pillars: improving asset quality; restructuring capital and provisions; recovering profitability; balancing the loan portfolio; and strengthening governance and digital transformation. For each pillar, the plan calls for specific goals, designated officials, timelines and measurable outcomes.
Rupali Bank PLC Managing Director Kazi Md. Wahedul Islam said an effective action plan has already been adopted in light of the Financial Institutions Division’s directives.