The Capital to Risk-Weighted Assets Ratio (CRAR) in Bangladesh’s banking sector plummeted to an all-time low of 3.08 per cent in December 2024 — far below the regulatory minimum of 10 per cent under the Basel III framework — manifesting that a significant portion of banks are effectively insolvent and unable to endure even minor financial disruptions.
More alarmingly, 14 banks reported negative CRARs, with five additional banks showing shortfalls, underscoring their inability to absorb losses or cope with loan defaults. Many banks now resemble hollowed-out shells rather than functioning banks.
The situation deteriorated in December 2024 from a CRAR of 11.64 per cent in December 2023, marking the lowest level since the adoption of the Basel III regulatory standard in 2014, according to Bangladesh Bank data.
This sharp fall comes as a massive amount of toxic loans previously swept under the carpet through data manipulation during the Awami League regime has now been exposed.
CRAR reflects the ratio of regulatory capital—comprising Tier-1 capital (paid-up capital, statutory reserves, retained earnings) and Tier-2 capital (subordinated debt, general provisions)—to risk-weighted assets (RWA), which include loans, investments and operational liabilities weighted by how risky they are.
CRAR is the most basic indicator of a bank’s health. It measures how much capital a bank holds relative to its risk exposure—called RWA.
Under international norms and BB rules, banks are required to maintain a minimum CRAR of 10per cent, plus an additional 2.5per cent Capital Conservation Buffer (CCB)—a total of 12.5per cent—to provide resilience and to ensure banks can weather economic shocks without breaching regulatory thresholds, financial experts said.
Yet the sector has not only failed to meet that benchmark; it has collapsed far below it. A CRAR of 3.08per cent means many banks are running on fumes, they said.
Bankers and analysts attributed the collapse in CRAR to a combination of unchecked loan disbursements, massive non-performing loans (NPLs), weak governance, and political interference.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, called the current fall in CRAR unprecedented and alarming, saying it reflects a dangerously weak banking sector.
He warned that negative CRARs mean some banks have no real capital left, making them barely functional.
He blamed aggressive, poorly scrutinized lending for the crisis, which led to a sharp rise in non-performing loans—reaching Tk 3.45 lakh crore by end-2024, nearly 20 per cent of all loans.
These defaults, he said, have eroded capital and trust. He urged the central bank to enforce strict recovery plans and tighter oversight to restore stability.
As of December 2024, Tier-1 capital in the sector dropped to a mere 0.48 per cent, compared to the regulatory requirement of 5.5 per cent, revealing the near-total depletion of core financial buffers.
State-owned commercial banks (SOCBs) are the worst affected, posting a combined CRAR of -8.42 per cent and a capital shortfall of Tk 65,208 crore.
Janata Bank registered a CRAR of negative 34.6 per cent with risk-weighted assets of Tk 1,18,580 crore. Agrani Bank stood at a borderline 4.19 per cent CRAR with RWAs Tk 80,661 crore, while Sonali Bank reported a relatively healthier 10.1 per cent with RWAs OF Tk 78,246 crore. Rupali Bank is nearly exhausted, with a CRAR of just 0.2 per cent with RWAs of Tk 52,954 crore.
CRARs at Rajshahi Krishi Unnayan Bank (RAKUB), Bangladesh Krishi Bank (BKB), BASIC Bank, Bangladesh Commerce Bank, and ICB Islamic Bank ranged between minus 6.51 per cent and minus 169 per cent.
The situation is similarly dire among several Shariah-based banks.
First Security Islami Bank posted a CRAR of -15.30 per cent with RWAs of Tk 55,308.03 crore. Social Islami Bank reported -15.01 per cent (RWAs of Tk 46,822.56 crore), Global Islami Bank -6.9 per cent ( RWAs of Tk 17,189.35 crore), Union Bank -26.79 per cent ( RWAs of Tk 42,645 crore) and Islami Bank Bangladesh had a CRAR of -3 per cent ( RWAs of Tk 99,133 crore) . These banks, under the control of the controversial S Alam Group, were reportedly drained of funds through dubious lending practices.
National Bank showed a CRAR of -3.41 per cent with RWAs worth Tk 58,164 crore, reflecting entrenched financial troubles. IFIC Bank, previously considered stable, fell into distress with a CRAR of -7.8 per cent and RWAs of Tk 50,727 crore.
Most of these banks failed to pay back depositors money that forced the central bank to inject around Tk 30,000 crore
Despite the overall downturn, a few banks maintained strong capital positions.
Prime Bank posted a CRAR of 17.86 per cent, followed by NCC Bank at 17.78 per cent, Eastern Bank at 17.27 per cent, Bank Asia at 16.91 per cent, City Bank at 16.24 per cent, and Dutch-Bangla Bank at 16.17 per cent. Shahjalal Islami Bank reported 15.85 per cent, BRAC Bank 14.94 per cent, One Bank 14.82 per cent, Dhaka Bank 14.54 per cent and MTB 13.85 per cent.
Moreover, all foreign banks outperformed their local counterparts, maintaining CRARs well above the regulatory threshold, ranging between 27 per cent and 93 per cent. Their low exposure to high-risk local clients and adherence to stringent internal risk controls have insulated them from the systemic vulnerabilities affecting local banks.
