Bangladesh’s banking sector has been in free-fall due to rising non-performing loans from both state and private banks alike. According to Bangladesh Bank, the total NPL combined from the 8 state-owned, 40 privately owned and 9 foreign banks stood at BDT 803.97 billion as of September 2017. This is in total 10.67% of all outstanding loans and 4% of the country’s GDP. If restructured and rescheduled loans are taken into consideration, the total outstanding loan reaches around 17% of total all outstanding loans.
State banks historically have performed worse than the private banks with state owned banks carrying 55% of the total NPL as of 2017, approximately BDT 441.26 billion. The banks combined also had a capital shortfall of BDT 126.83 billion by June, 2017.
The finance ministry proposed to reduce the cash reserve requirement (CRR) by one percentage point to 5.5%, which the Bangladesh Bank carried out in April, 2018, to mitigate the ongoing liquidity crisis in the banks.
