10 public and private sector banks are not able to keep sufficient amount of provision (safety reserve) against good and bad loans. At the end of September 2024, the total provision deficit in these banks exceeded Tk 56 thousand crore.
According to the data of Bangladesh Bank, the total deficit of 10 banks, government and private, is 56 thousand 36 crores. A few banks have kept reserves in excess of their target, resulting in an overall provision deficit in the banking sector of Tk 55,378 crore.
Last June, the provision deficit of the banking sector was Tk 31 thousand 544 crores. In other words, the provision deficit has increased by 24 thousand 492 crores in just three months.
Economists say that the current condition of the bank will lead to a provision deficit. Because defaulted loans are increasing day by day.
Despite this, defaulted loans have increased a lot recently. Hence the provision deficit will increase. One hundred percent provision should be kept here. Here one is related to the other.
If the provision increases like this, the banks will become weaker. In order to reduce the provision deficit, the defaulted loans must first be reduced. Loans should be scrutinized so that the money is returned.
As per norms, banks are required to keep 0.5 to 5 percent of operating profit as provision against general category loans, 20 percent against substandard bad loans and 50 percent against doubtful bad loans. Apart from this, there is a provision for setting aside 100 percent provisioning against bad or loss category default loans for each bank.
A provision deficit is an ominous indicator for the banking sector, as it reflects the poor financial condition of banks, which is largely a result of high non-performing loans.
