BM Desk : Bangladesh’s banking industry will continue to face pressure until 2021, according to a forecast by international credit rating agency S&P Global Rettings. According to the company’s most recent evaluation, the primary causes of this issue include long-standing structural flaws, declining resource quality, and low operational profitability.
S&P predicted in the middle of 2021 that the banking industry in Bangladesh was still characterized by high credit risks, dispersed operations, and state-owned and some Islamic bank management systems. Together, these issues are causing the banking industry’s stability and efficacy to be disrupted.

S&P has indicated that several Islamic banks are facing a liquidity crisis, with many banks experiencing capital shortages. Consequently, the overall banking system is adversely affected.

Shinoy Vergiz, a loan analyst at the agency, remarked, “The banking sector in Bangladesh continues to be burdened by weak debt and complicated regulatory laws. State-owned banks have sustained low-quality resources, leading to issues with old loans and their renewal.”

Recently, Bangladesh Bank has implemented measures to categorize expired loans, enforce stringent conditions for loan renewals, and clarify the definition of deliberate debt.

According to S&P, these stringent measures have exerted pressure on some banks in the short term; however, they may facilitate the restoration of transparency and regulations in the sector in the long run.

The report further noted that while the incidence of defaulted loans is expected to rise, a market-based interest system along with elevated interest rates could somewhat enhance the interest-based income of banks. Vergiz stated, “Interest rates may be relatively high by 2021, which will boost the net income of banks even if loan demand declines.

However, recent policy actions by Bangladesh Bank are moving towards building transparency and an accountable banking system, which can help turn the sector around in the future.