The provision shortfall in Bangladesh’s banking sector surged to a record Tk 1.7 lakh crore at the end of March 2025, reflecting a 61 per cent increase in just three months as banks’ distressed assets continued to surge alarmingly.
According to Bangladesh Bank data, the provision deficit climbed to Tk 1,70,655 crore in March, up from Tk 1,06,130 crore in December 2024, Tk 55,378 crore in September, and Tk 31,549 crore in June.
Financial experts said that the sharp rise in provision shortfall has exposed deep-rooted financial irregularities that were hidden under the previous Awami League-led government, which fell on August 5, 2024.
A surge in non-performing loans surfaced after Bangladesh Bank began revealing the true state of banks, ending years of leniency toward politically connected borrowers, they said.
Struggling banks are now unable to maintain required provisions due to the sudden spike in such toxic loans. Experts say this reflects a systemic crisis caused by widespread loan irregularities, weak regulatory oversight, and political interference.
Private banks are bearing the brunt of the crisis. Their provision shortfall more than doubled in just three months — rising to Tk 1,07,340 crore in March from Tk 48,883 crore in December, and just Tk 15,831 crore in September 2024. These banks now account for 63 per cent of the total provision deficit in the sector.
State-owned banks are also under severe strain. Their shortfall rose to Tk 63,996 crore in March from Tk 57,966 crore in December, Tk 40,204 crore in September, and Tk 11,428 crore in June 2024.
Banks are required to maintain a certain level of provisions to safeguard against potential losses from bad loans.
Failure to meet this requirement results in a provision shortfall, revealing the bank’s vulnerability to financial shocks.
The deepening shortfall is directly linked to the sharp increase in non-performing loans (NPLs), weak capital positions, and poor loan recovery practices.
The amount of defaulted loans in the banking system jumped by Tk 74,570 crore in the three months leading to March 2025, reaching an all-time high of Tk 4.20 lakh crore.
The NPL volume stood at Tk 3,45,764 crore in December, Tk 2,84,977 crore in September, and Tk 2,11,391 crore in June.
Just a year earlier, in December 2023, the total stood at Tk 1,45,633 crore.
By March 2025, around 24.13 per cent of all loans — out of a total loan portfolio of Tk 17.41 lakh crore — had been classified as non-performing, marking the highest ratio in South Asia.
Private banks alone accounted for Tk 2.64 lakh crore in defaulted loans by March 2025, up from Tk 2 lakh crore in December. State-owned banks followed with Tk 1.46 lakh crore in March in such toxic loans, up from Tk 1.36 lakh crore in December.
Under current regulations, banks are required to set aside provisions ranging from 0.5 per cent to 5 per cent for standard loans.
For classified loans, the requirements are much higher — 20 per cent for substandard, 50 per cent for doubtful, and 100 per cent for bad or loss-category loans.
In March 2025, Bangladesh Bank introduced new rules restricting dividend payouts.
Under the new rules, starting from 2024, banks that have received provisioning deferrals — temporary exemptions from maintaining the required loan-loss provisions — are no longer allowed to declare or distribute dividends to shareholders.
Additionally, from 2025 year-end, any bank with non-performing loans (NPLs) exceeding 10 per cent of its total loan portfolio will also be barred from issuing dividends.
Due to having deferral facilities, BB restricted 18 listed banks from paying dividends for the year 2024.
