New Delhi, June 18 (IANS) Bangladesh’s banking sector slipped into a crisis at the end of 2025, with the capital adequacy ratio falling to minus 2.64 per cent, after a wave of previously concealed bad loans came to light, making them the weakest in South Asia to absorb financial shocks, a new report has said.
By comparison, CRAR stood at 17.20 per cent in India, 20.80 per cent in Pakistan and 19.40 per cent in Sri Lanka at the end of 2025, the report from Bangladesh-based The Daily Star said.
A large number of previously hidden bad loans came to light following the fall of the Awami League-led government in August 2024, the media house said.
Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank and a former chairman of the Association of Bankers, Bangladesh (ABB) attributed the negative capital position of the banking sector to widespread financial scams.
He said many banks have availed regulatory deferral facilities, which allow them to delay recognising losses or meeting certain regulatory requirements and warned that the financial position of banks could worsen further once these facilities expire.
The capital adequacy ratio, also known as the Capital to Risk-Weighted Assets Ratio (CRAR), measures capital held by banks as a safety cushion against risky lending. A bank’s capital buffer to absorb losses if borrowers fail to repay loans is measured by CRAR.
Under international Basel III rules, banks are expected to maintain a minimum capital adequacy ratio of 10 percent, plus an additional 2.5 percent buffer to protect against financial stress.
Non‑performing loans are the main pressure point of Bangladesh banks as bad loans rose to Tk 5,57,217 crore or 30.60 per cent of total loans at the end of 2025 and climbed further to Tk 588,704 crore (32.26 per cent) by March 2026, Bangladesh Bank data showed.
“If policymakers want to restore the banking sector to a healthy and sustainable position, there is no alternative to taking strong and decisive corrective measures,” said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM) and a former chief economist of the Bangladesh Bank.
—IANS
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