Banking sector’s troubles are much deeper than thought

Business Desk :

The “Financial Stability Report 2022” by the Bangladesh Bank, released following the International Monetary Fund’s (IMF) guideline of $4.7 billion in budget support, reveals a far more troubling picture of the banking industry.

The disparities in data compared to the central bank’s previously published quarterly report has prompted economists and banking professionals to question the efficacy of banking sector policies, as the discrepancies between the reported and actual data cast doubt on their effectiveness.

The Financial Stability Report is believed to have presented a more accurate portrayal of the current state of the banking sector.

Within the economic and banking community, concerns have risen regarding the escalation of defaulted loans in Bangladesh.

The prevailing issue is that the growth of capital does not correspond proportionately to the increase in these defaulted loans.

Additionally, there has been a noticeable rise in the risk-based assets held by banks.

There is a growing suspicion that several banks are not disclosing precise financial data, leading to a gradual erosion of the capital base of the country’s banking institutions instead of its intended strengthening.

The assessment among economists and banking experts is that the recently unveiled Financial Stability Report offers more accurate insight into the true condition of the banking sector.

The disparity in data between the earlier quarterly report and the comprehensive Financial Stability Report underscores the necessity for more transparent reporting and stringent oversight to ensure the health and stability of Bangladesh’s banking industry.

“Earlier report was published with the provisional data of last year. Now we used the revised figures of earlier data. Due to this, changes have been seen in some indicators,” said the Director of the Financial Stability Department of the Bangladesh Bank, Md Ala Uddin:
According to Bangladesh Bank’s quarterly data for 2022, the amount of rescheduled loans of banks in the country was Tk29,283 crore but the latest published Financial Stability Report 2022, of Bangladesh Bank for the same year paints a different picture. Its mentioned amount is Tk63,720 crore.

That is, actual rescheduled loans increased by more than 177%.