Business Report :
Bangladeshi banks ended 2024 with the lowest resilience to risky assets in South Asia, as long-concealed toxic loans came to light following last August’s political transition.
According to Bangladesh Bank’s latest Financial Stability Report-2024, the exposure of hidden losses sharply eroded banks’ reserve buffers, dragging the capital adequacy ratio far below regulatory requirements.
The Capital to Risk-Weighted Assets Ratio (CRAR) – the key indicator of how much capital a bank holds against risk-weighted loans – fell to just 3.08 percent at the end of 2024. By international standards this is critically low: Basel III rules require a minimum of 10 percent, plus an additional 2.5 percent conservation buffer.
In contrast, CRAR levels stood at 16.7 percent in India as of September 2024, 18.4 percent in Sri Lanka, and 20.6 percent in Pakistan. Even smaller economies such as Nepal, Bhutan, and Afghanistan reported ratios comfortably above the 10 percent threshold.
Bangladesh’s banking sector has historically maintained weaker capital adequacy than its regional peers, averaging about 11 percent. However, the latest figures represent a steep fall of more than 8.5 percentage points from 11.64 percent a year earlier.
The report identified defaults by large borrowers as the biggest risk to bank capital, followed by the devaluation of collateral. By December 2024, only 42 banks remained compliant with CRAR requirements, representing 59 percent of sectoral assets and 57 percent of liabilities.
Non-compliant banks accounted for 41 percent of assets but 43 percent of liabilities, leaving a 2-point gap where liabilities outweighed assets.
Foreign banks remained comfortably above the capital threshold, while conventional private banks were only marginally compliant. State-owned banks and Shariah-based private banks saw the most severe deterioration.
The position of non-bank financial institutions (NBFIs) was even weaker. Their bad-loan ratio rose from 31.55 percent to 33.83 percent during 2024, while their CRAR turned negative at -6.46 percent.
Overall distressed loans in Bangladesh’s banking sector surged to a record Tk7.56 trillion at the end of 2024 – equivalent to 45 percent of total outstanding loans. Against total loans of Tk16.82 trillion, distressed assets amounted to Tk7.56 trillion, nearly matching the size of the national budget for FY2025-26.
