Bangladesh Bank Governor Dr Atiur Rahman, speaks at the launching of the Financial Stability Report at his office in Dhaka Sunday.

Rapid credit expansion in recent years has added burden on the banks in maintaining higher annual income for provisioning and thus resulted in more risks for banks’ assets.

The Financial Stability Report (FSR) 2011 of the Bangladesh Bank (BB) released Sunday disclosed this. BB Governor released the report at the BB headquarters in the capital.

The report says the country’s banks could not improve the status of capital adequacy ratio (CAR) because of the credit risk along with two other minor factors such as operational and market risks.

According to the FSR 2011, five worst banks, of which four are state-owned commercial banks (SCBs), together share 60.3 percent of total classified loans.

Classified loans, also known as non-performing loans (NPL) of the SCBs, were Tk 148.9 billion at the end of December 2011, but fell to Tk 117.72 billion at end of June 2012, according to BB data.

Total NPL in the banking sector at present is around Tk. 270 billion, but the share of private commercial banks and foreign banks respectively amount to Tk. 80 billion and Tk 70 billion respectively. The remaining amount is accounted for the non-bank financial institutions.

In the FSR, the central bank observed that the high NPL to total loans ratio has strong implications for overall financial performance of the banks. The report says the high ratio of bad loans to total NPL significantly undermine the asset quality in the banking sector.

News: The Daily Sun/Bangladesh/8th-Oct-12