Overall shortfall in provision against both classified and unclassified loans in the country's banking system swelled by nearly 18 per cent or Tk 11.91 billion in the first quarter (Q1) of the current calendar year.
The aggregate amount of provisioning shortfall rose to Tk 79.58 billion during the January-March period of 2018 from Tk 67.67 billion three months ago, according to the central bank's statistics.
"Fresh classified loans pushed up the volume of provision shortfall with the banks," a senior official of the Bangladesh Bank (BB) told the FE on Monday.
During the period under review, the volume of non-performing loans (NPLs) in the banking system jumped by over 19 per cent to Tk 885.89 billion from Tk 743.03 billion in the preceding quarter.
He also said public banks have faced more provisioning shortfall than that of private commercial banks.
Twelve out of 57 banks have failed to keep requisite provisions against loans, particularly classified ones in the first quarter of 2018, according to the BB data.
Of them, four are state-owned commercial banks (SoCBs) and others are private commercial banks (PCBs).
Nine banks including four public ones had faced such provisioning shortfall during the October-December period of 2017.
Under the existing BB regulations, the banks have to keep 0.25 per cent to 5.0 per cent provision against general category loans while 20 per cent against substandard category, 50 per cent against doubtful loans and 100 per cent against bad or loss category.
The banks usually keep required provisions against both classified and unclassified loans from their operating profits in a bid to mitigate financial risks.
"The banks may trim down their provisioning shortfall by reducing classified loans or increasing eligible collaterals against the credits," another BB official said in reply to a query.
Talking to the FE, M A Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Ltd, said a portion of rescheduled loans has already turned into classified ones again. It has also pushed up the volume of provisioning shortfall.
The senior banker expects that both the volume of NPLs and provisioning shortfall will come down in the second quarter of this calendar year.
He also sought legal support to speed up the recovery process of default loans that would help improve financial health of the banking sector.
