Overall shortfall in provisioning against loans in the country's banking system swelled by over 20 per cent or Tk 13.60 billion during the first nine months of the year.
The total amount of provisioning shortfall rose to Tk 81.27 billion as on September 30 from Tk 67.67 billion nine months ago, according to the central bank's latest statistics.
The shortfall was Tk 79.80 billion as on June 30 this year.
It was Tk 63.44 billion a year before.
"Higher growth in non-performing loans pushed up the amount of provisioning shortfall with the banks during the period under review," a senior official of the Bangladesh Bank (BB) told the FE on Monday.
The amount of classified loans rose by nearly 34 per cent or Tk 250.67 billion to Tk 993.70 billion as on September 30, from Tk 743.03 billion as on December 31, 2017, the BB data showed.
The public sector banks have faced more provisioning shortfall than that of the private commercial banks, the central banker explained.
Senior bankers, however, said profitability of some banks has declined slightly following lower 'interest income' mainly due to slashing of interest rates on lending.
"Lower profitability has also pushed up the amount of provisioning shortfall in the Q3 of 2018," a senior executive of a leading private bank told the FE while explaining the situation.
A good number of banks have brought down the lending rate to the single-digit, particularly for term loans and working capital in line with the decisions of the Bangladesh Association of Banks (BAB).
On June 20, the lobbyist group decided to cut back on the interest rates on both lending and deposit at 9.0 per cent and 6.0 per cent respectively from July 01.
The private banker also said a coordinated effort will be taken immediately to improve the overall situation in the country's banking system.
Talking to the FE, another BB official said the banks will have to boost their recovery drives to reduce the volume of NPLs as well as provisioning shortfall.
A total of 12 banks, out of 57, failed to keep the requisite provisions against loans, particularly the NPLs, in the third quarter (Q3) covering July-September period of 2018, the BB data showed.
Of them, four are state-owned commercial banks (SoCBs) and others are private lenders.
Nine banks, including four state lenders, faced such provisioning shortfall during the final quarter (Oct-Dec) of 2017, while the number was 13 in the second quarter (April-June) of 2018.
It was 12 in the first quarter (Jan-March) of the current calendar year.
Under the existing BB regulations, the banks have to keep 0.25 per cent to 5.0 per cent provision against loans under general category, 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 the required provisions against both classified and unclassified loans from their operating profits in order to mitigate risks.
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