Provisioning shortfalls in the country's banking industry surged by nearly 19 per cent to Tk 315.49 billion as of June 30, 2024, according to Bangladesh Bank statistics.
This significant shortfall is concentrated mainly in ten banks, including six private commercial banks.
The banks are: National Bank, BASIC Bank, Agrani Bank, Rupali Bank, Bangladesh Commerce Bank, Dhaka Bank, Standard Bank, Bangladesh Development Bank, IFIC Bank, and Southeast Bank.
According to banking regulations, banks are required to maintain provisions ranging from 0.50 per cent to 5.0 per cent of their deposits.
However, this requirement can escalate to between 20 per cent and 100 per cent depending on the classification of defaulted loans.
The shortfall in provisions is primarily due to high levels of non-performing loans (NPLs), which significantly impact the banks' net profits.
As provisioning shortfalls increase, they reduce the bank's ability to absorb losses, thus affecting profitability.
"The provision shortfall in the banking sector increased by Tk 49.63 billion over the past three months ending in June," the Bangladesh Bank report says.
In March 2024, the sector's provision shortfall stood at Tk 265.86 billion.
Furthermore, the report highlighted that default loans in the banking sector reached Tk 2.113 trillion, or 12.56 per cent of the total outstanding loans disbursed by the industry during the April-June period.
This marks an increase of Tk 290.96 billion from the Tk 1.822 trillion recorded during the January-March 2024 period.
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