The country鈥檚 banking sector has been facing deepening crisis, as bad loans continue to soar, capital buffers shrink, and profitability slips into negative territory, according to Bangladesh Bank鈥檚 latest quarterly report for January鈥揗arch 2025.
The report, released on Sunday, highlighted deep structural weaknesses, warning that the sector has reached a 鈥榗ritical juncture鈥� with ballooning non-performing loans sluggish credit growth, and capital shortfalls.
Non-performing loans (NPLs) jumped sharply in the first quarter of 2025, climbing to Tk聽4.2 lakh crore by the end of March from Tk 3.45 lakh crore in December 2024.
It pushed the NPL ratio to 24.13 per cent of total loans, up from 20.20 per cent in the previous quarter. The surge in defaults forced banks to set aside higher provisions, severely squeezing profits, the report said.
The capital base of banks also deteriorated alarmingly. The Capital to Risk Weighted Assets Ratio (CRAR), a key indicator of a bank鈥檚 strength, dropped to just 3.08 per cent in March鈥攚ell below the Basel III international minimum鈥攃ompared with 6.86 per cent in December.
Such a fall reflects the combined stress of rising loan defaults and weak capital injections by shareholders.
Profitability turned negative as a result. Net profit after provisions and tax fell into the red, dragging return on assets (ROA) down to 鈥�0.18 per cent and return on equity (ROE) to 鈥�3.99 per cent, from 0.23 per cent and 4.32 per cent, respectively, a year earlier.
The report attributed this mainly to a 77.61 per cent year-on-year jump in provisions for bad loans, coupled with lower operating income.
On the funding side, deposit growth鈥攁 major source of bank liquidity鈥攕lowed to 8.51 per cent in March 2025, down from 9.98 per cent a year earlier.
Loan growth remained stuck at 8.22 per cent, showing little improvement from the previous quarter.
The central bank noted that the combination of mounting defaults, regulatory restrictions on lending by troubled banks, political uncertainty, weak business sentiment, and high borrowing costs contributed to sluggish credit expansion.
The report warned that this stagnation in both deposits and credit could choke economic activity if left unaddressed.
It also pointed to eroding depositor confidence.
Despite liquidity support from the central bank, several banks struggled to meet withdrawal demands at counters, triggering panic among customers.
While a few banks have stabilised, others remain under stress, it added.
In response, Bangladesh Bank has stepped up reforms. It is introducing tighter rules on loan classification, provisioning, and recovery, in line with international standards.
鈥楪ood governance and structural reforms remain the priorities in addressing these challenges. In recent months, BB has launched a series of legal and institutional reform measures to ensure good governance and address structural problems,鈥� the report suggested.
