10 Banks In Deep Crisis

In 2009, when the Awami League came to power, the amount of non-performing loans (NPLs) in the banking sector was 22,481 crore taka. Now, that figure has risen to over 2 lakh 11 thousand crore taka. This means that under Sheikh Hasina's government, the non-performing loans in the banking sector have increased by 1 lakh 88 thousand 910 crore taka over 16 years. The top 10 banks in the country are struggling due to these non-performing loans. According to the latest report on non-performing loans from the Bangladesh Bank for the quarter ending June 2024, these issues have become evident.

Banks are required to maintain a certain amount of provisions against the quality of distributed loans. When a loan turns into a non-performing loan, provisions are needed to mitigate future risks. To protect depositors' interests, banks maintain these provisions from their profits or shareholders' equity.

The latest data from the central bank indicates that 10 government and private banks have failed to maintain the required provisions against their loans. These banks include the state-owned Basic Bank, Agrani Bank, Rupali Bank, and Bangladesh Development Bank (BDBL), as well as private sector banks like Bangladesh Commerce Bank, Dhaka Bank, IFIC Bank, National Bank, Southeast Bank, and Standard Bank. The total provision shortfall for these banks has exceeded 31 thousand 548 crore taka.

According to the policy, provisions should be between 0.25% to 5% based on the type of classified loans. For regular or classified loans, provisions should be between 0.5% and 5% of operating profit. For 'sub-standard' loans, it should be 20%, for 'doubtful' loans, 50%, and for 'bad' loans, it should be 100%.

As of June this year, the banking sector was supposed to maintain provisions totaling 1 lakh 14 thousand 165 crore taka. However, the actual provision was 89 thousand 355 crore taka, resulting in a shortfall of 24 thousand 810 crore taka. Some banks have kept excess provisions, which has somewhat reduced the overall shortfall.

According to the central bank's report, the worst-hit bank in terms of provision shortfall is National Bank, with a shortfall of 14 thousand 703 crore 96 lakh taka. The shortfall for Basic Bank is 5 thousand 241 crore taka, Agrani Bank 5 thousand 311 crore taka, Rupali Bank 4 thousand 401 crore taka, and BDBL 24 crore taka. Among private banks, Bangladesh Commerce Bank has a shortfall of 443 crore taka, Dhaka Bank 327 crore taka, IFIC Bank 506 crore taka, Southeast Bank 198 crore taka, and Standard Bank 391 crore taka.

The report also indicates that 30 banks have managed to maintain the required provisions, meaning there are no shortages or surpluses in these banks. However, 10 government and private banks have failed to maintain sufficient provisions, while the remaining banks have excess provisions.

As of June 2024, the total amount of distributed loans in the banking sector was 16 lakh 83 thousand 396 crore taka. Out of this, 2 lakh 11 thousand 391 crore taka has become non-performing, which is 12.56% of the total distributed loans. Three months prior, in March, the total distributed loans were 16 lakh 40 thousand 855 crore taka, with 1 lakh 82 thousand 295 crore taka classified as non-performing, which was 11.11% of the total distributed loans. This means that over the three-month period, non-performing loans increased by 29 thousand 96 crore taka.

In response to these figures, Dr. Zahid Hossain, former Chief Economist of the World Bank Bangladesh Resident Mission, stated that it is necessary to maintain provisions against non-performing loans as per regulations. As non-performing loans increase, more provisions are required, and if these are not maintained, the shortfall will continue to rise. If the Bangladesh Bank calculates non-performing loans according to international standards, the figures may be even higher, leading to a further increase in the shortfall.

Dr. Zahid also emphasized that to reduce the shortfall, non-performing loans must be addressed. Ensuring good governance in the banking sector is crucial, including making the board free from political influence, taking swift action against institutions that fail to repay loans, and bringing wrongdoers and major actors in the sector under the law.