As of June this year, a provision shortfall among banks has worsened, with 10 banks reporting a combined deficit of Tk 31,549 crore, according to Bangladesh Bank data. This includes four state-owned and six private banks. The sector’s provision shortfall increased by Tk 4,963 crore from April to June, reaching Tk 31,549 crore by June, up from Tk 26,586 crore in March. Default loans in the banking sector surged to Tk 2,11,392 crore, or 12.56% of total loans, up from Tk 1,82,295 crore in March. The rise in default loans and provision shortfalls, exceeding international standards, signals significant risks for the sector. Banks are required to maintain provisions of 0.50% to 5% of their deposits, but high non-performing loans result in decreased profits and reduced dividends. As of now, 16 banks are struggling to meet the required Capital Adequacy Ratio. The Bangladesh Bank has committed to improving loan classification standards and reducing non-performing loan ratios by 2026, as part of an IMF agreement for a $4.7 billion loan.
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