The capital base of banks in Bangladesh weakened in 2021 mainly for buildup of classified loans, officials say, as backup monetary measures work little.
Latest statistics available with Bangladesh Bank (BB) show that the capital-to-risk weighted-asset ratio (CRAR) of all the scheduled banks came down to 11.08 per cent on December 31 in the last calendar year from 11.64 per cent the same day a year before.
"The capital base of banks deteriorated slightly in the outgoing calendar year mainly due to upward trend in non-performing loans (NPLs) in the banking sector," a BB senior official told the FE while explaining the latest situation on CRAR in the banking system.
The amount of classified loans in the country's banking system jumped by 16.38 per cent or Tk 145.40 billion to Tk 1032.74 billion, as of December 31, in the past year from Tk 887.34 billion a year ago, despite policy support from the central bank.
On the other hand, 10 banks out of the total 60 suffered a total capital shortfall worth Tk 346.40 billion in 2021 on the same ground.
The 10 banks-five state-owned commercial banks (SoCBs), three private commercial banks (PCBs) and two specialised banks (SBs) -were put on the list of capital shortfall, according to the BB officials.
They also say most of these banks are chronological defaulters regarding maintaining their CRAR.
In 2020, the same number of banks suffered a total capital shortfall worth Tk 289.50 billion despite a falling trend in default loans.
The CRAR of PCBs was found, on average, 13.72 per cent as on December 31 last while the CRAR of nine foreign commercial banks stood at 25.45 per cent.
However, the capital position of public banks is still a matter of concern, the central bank official adds.
The CRAR of six SoCBs stood at 3.71 per cent as on December 31 last calendar year while the CRAR of two SBs was in the negative territory at 33.62 per cent, the BB data show.
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