The banking sector is burdened by a provision deficit of Tk 26,586 crore due to high levels of non-performing loans (NPLs). This deficit highlights the financial fragility of banks, as they are required to maintain adequate provisions against good and bad loans. Mismanagement and loan fraud have contributed to the rise in NPLs, making it difficult for some banks to meet their provision requirements. As of March 2024, the provision deficit increased by Tk 2,397 crore from December 2023. According to Bangladesh Bank’s report, banks must keep provisions ranging from 0.5% to 5% of their operating profit. The increase in NPLs has exacerbated the provision deficit, reflecting the banks’ weakened financial state. To address this issue, reducing NPLs is essential to improve the banks’ financial health and stability.
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