Banks in Bangladesh are suffering from surging provisioning shortfall as it widened over 48% to Tk16,298 crore as of last March against the figures three months ago in December 2022.
Provision shortfall occurs when a financial obligation exceeds the amount of cash available.
It can be temporary, arising out of a unique set of circumstances, or persistent, indicating poor financial-management practices.
Banks have to maintain 0.50% to 5% of their operating profits in provisioning against general-category loans, 20% against classified loans of substandard category, and 50% against classified loans of doubtful category.
The worse the status of a classified loan, the higher is the provisioning obligation for the banks.
They have to set aside 100% against bad loans from the profits as provisioning.
Between January and March, the shortfall swelled as three state-owned banks contributed much to the total provisioning shortfall, which had a combined deficit of Tk10,342 crore, according to data released Sunday by Bangladesh Bank.
The biggest state-owned bank Sonali Bank however, had a provision surplus worth Tk1,326 crore during January-March 2023 period.
Private commercial banks' combined provision shortfall was recorded at Tk6,478 crore during the period.
The nine foreign banks, however, had a provision surplus worth Tk 5.25 billion during the period under review.
Three specialized banks--Bangladesh Krishi Bank, Probashi Kalyan Bank, and Rajshahi Krishi Unnayan Bank--had a combined shortfall of Tk3.36 crore during the period.
In the meantime, the non-performing loans (NPLs) in the banking sector had increased by 8.8% from three months ago, data from the Bangladesh Bank showed.
The banking industry's total outstanding was recorded at Tk1,496,000 crore, as of March last, and the total unclassified was at Tk1,365,000 crore.