Bangladesh Bank warns of a significant threat to the country’s financial sector due to a rise in non-performing loans (NPLs). At 9% of total outstanding loans, amounting to Tk 145,600 crore by December 2023, NPLs are affecting banking stability, profitability, and public confidence. The figure increased from Tk 120,650 crore (8.23%) in December 2022. The persistent high NPLs require increased provisioning, leading to capital shortfalls in banks. State-owned and specialized banks struggle to maintain minimum capital adequacy ratios, posing long-term risks. Additionally, challenges such as Islamic banks’ liquidity support, currency depreciation, external deficits, and liquidity shortages exacerbate the situation. High inflation further deters depositors, potentially impeding economic growth if not swiftly addressed.
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