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Capital to risk-weighted asset hits 15-yr low as 16 banks miss the requirement

Capital shortfall reaches Tk53,255cr in three months

17 March, 2025, 12:05 am

Last modified: 17 March, 2025, 12:06 am

Infographic: TBS

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Infographic: TBS

At least 16 banks – an increase of five – failed to maintain the mandatory Capital to Risk-Weighted Asset Ratio (CRAR) in the September quarter of 2024.  

The sector-wide CRAR dropped below 7% – well below the 10% minimum and the lowest average in 15 years – due to taking into account the real data on non-performing loans and the overall health of the banking sector.  

CRAR measures a bank’s financial stability by comparing its capital to risk-weighted assets, ensuring it can absorb potential losses and protect depositors.  

According to a Bangladesh Bank report, the banking sector’s aggregate CRAR stood at 6.86% at the end of the September quarter, down from 10.64% at the end of June 2024.  

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As per central bank regulations, banks must maintain a minimum CRAR of 10%. However, by the end of September, at least 16 of the country’s 61 banks failed to meet this requirement, up from 11 at the end of June.  

A senior central bank official told The Business Standard, “With the rise in classified loans during the September quarter, we had to set aside more provisions, increasing the risk-weighted assets in the banking sector.” 

“This, in turn, has worsened accumulated losses and reduced capital. We have not seen such a poor CRAR situation since 2010,” he added. 

In September 2024, classified loans accounted for 17% of total banking sector loans, amounting to Tk2.85 lakh crore, which rose to 20% in December.  

According to the central bank’s report, about 82% of the banking sector’s total classified loans fall under the worst-case Bad and Loss category, requiring banks to maintain a 100% provision.  

The banking sector’s Tier-1 capital ratio was 4.13% in the September quarter, marking a decline from the previous quarter and falling below the regulatory minimum requirement of 6%.  

During the quarter, foreign commercial banks had the highest CRAR at 43.67%, while the specialised development banks had the lowest at -42.20%. 

The CRAR of state-owned commercial banks turned negative (-2.48%) in the September quarter, down from 5.44% in the previous quarter.  

Commenting on the possibility of a further decline in CRAR in December, the central bank official said, “NPLs and provision requirements increased in December, which did not boost banks’ capital or profitability. While we have not yet completed the December data, we believe CRAR could decline further.”  

The central bank’s report states that the banking sector held Tk1.07 lakh crore in regulatory capital, falling short of the Tk1.61 lakh crore minimum requirement by Tk53,255 crore at the end of the September quarter.  

Sheikh Mohammad Maroof, managing director of Dhaka Bank, told TBS that the sector-wide average has declined due to increasing capital deficits in state-owned commercial banks and specialised development banks. Additionally, some problem banks have started acknowledging their losses, further eroding their capital.  

Commenting on the decline in the banking sector’s CRAR, he said, “When the CRAR drops significantly within a quarter, it creates trust issues with foreign parties. On top of that, Moody’s recently downgraded our rating, which will increase trade costs with foreign banks and may reduce our loan limits. The banking sector’s poor image will also impact the inflow of new FDI into the country.”  

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the decrease in CRAR reduces banks’ lending capacity and operational activity. 

To improve governance in banks facing capital shortfalls, the seasoned banker emphasised the need for recapitalisation, a stronger focus on recovering classified loans, and increasing profitability. 



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