The capital base of the country’s banking sector strengthened in the first quarter of this year as some banks have been enjoying deferral facility on keeping their provisioning against non-performing loans (NPLs).
As of March this year, banks’ capital adequacy ratio (CAR) stood at 11.67%, up from 11.64% three months ago, as per the latest data from the Bangladesh Bank.
Some state-run banks were given deferral facilities by the central bank in case of provisioning against their default loans which resulted in their healthy capitals, said a senior Bangladesh Bank official.
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The country’s state-run commercial banks have maintained a very low capital adequacy ratio as the CAR of those banks stood at 6.49% till March this year.
State-run specialized Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank have been maintaining negative capital adequacy ratios — their average CAR stood at -31.86% in March.
However, the country’s private commercial banks have been maintaining a relatively standard capital adequacy ratio — the average CAR of those banks stood at 13.44% at the end of March.
In addition, foreign commercial banks have also been maintaining a high standard capital adequacy ratio, with the standing at 28.04% at the end of March.
The country’s banking sector failed to maintain its CAR as per the deadline set by the Bangladesh Bank for implementation of Basel-III by December 2019.
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Basel-III is an international standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by operations, the central bank official explained.
He added that the Bangladesh Bank had set December 2019 as the deadline for banks to increase the CAR to 12.5%.
The country’s banking sector has failed to achieve the global standard for CAR as 10 to 12 banks have been facing a capital shortfall for a long time now.
Eleven banks faced a capital shortfall of Tk24,783 crore in the first quarter of 2021, as per central bank data.
