The country’s banking sector faces a serious risk if the top three borrowers of each bank default, with nineteen banks failing to maintain the minimum required capital-to-risk weighted Assets Ratio (CRAR). Ten out of 61 banks are already unable to meet the minimum CRAR requirement. If the overall non-performing loans (NPLs) increase by just 3%, five more banks would fail to maintain the required CRAR.
According to the Bangladesh Bank’s Quarterly Financial Stability report, the banking sector’s CRAR slightly decreased year-on-year, standing at 11.08% at the end of September 2023. Non-performing loans (NPLs) stood at Tk1.45 lakh crore in December 2023. Despite the decline, the concentration of NPLs among the top five and top ten banks remains a concern.
Moreover, the proportion of bad and loss category loans was 87.72% of the total classified loans at the end of September 2023. The banking sector’s profitability has been impacted by increased provisions, with Return on Asset (ROA) and Return on Equity (ROE) showing slight decreases in July-September 2023 compared to the preceding quarter.
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