The shortfall in provisions in the country’s banking sector nearly doubled at the end of September due to increased distressed assets in banks, especially in the state-run ones.
According to Bangladesh Bank data, the provision shortfall in the sector soared to Tk 55,378 crore in September from Tk 31,549 crore in June.
The state-run banks logged 72 per cent of the total shortfall, as the deficit reached Tk 40,204 crore in September, which was three times of Tk 11,428 crore in June.
The provision shortfall at the private banks also rose by Tk 1,745 crore to reach Tk 15,831 crore in September compared with that in June quarter.
The deficit continued increasing due to the banks’ weakened ability to maintain provisions against defaulted loans.
This significant shortfall was driven by a substantial rise in non-performing loans over the past years, eroding the bank’s financial stability, BB officials said.
According to Bangladesh Bank data, the amount of defaulted loans shot up by more than Tk 1 lakh crore to Tk 2,84,977 crore in September compared with that of Tk 1,82,295 crore at the end of March 2024 and Tk 1,45,633 crore at the end of December 2023.
As of September, nearly 17 per cent of total bank loans — amounting to Tk 16.82 lakh crore — was classified as non-performing, the highest ratio in South Asia.
By the end of September, the amount of defaulted loans in the private commercial banks reached Tk 1,49,806 crore from Tk 70,981 crore in December 2023.
In September, the volume of such bad loans in the state-owned commercial banks jumped to Tk 1,26,111 crore from Tk 65,781 crore in December 2023.
According to regulatory requirements, banks must maintain provisions against their general category loans at a rate of 0.5 per cent to 5 per cent of their operating profits.
For classified loans in the substandard category, provisions must be set at 20 per cent, while classified loans in the doubtful category require provisions of 50 per cent.
Banks are required to set aside 100 per cent of the amount of classified loans in the bad or loss category as provisions, which are to be taken from their profits.
High levels of defaulted loans or non-performing loans were the primary cause for the banks’ inability to maintain adequate provisions in recent months, according to BB officials.
