Banks found in Bangladesh maintain lowest capital than other South Asian nations
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The capital adequacy ratio (CAR) of the banking industry stood at 11.6% by the end of December 2019, that was 10.5% year ago
Banking sector in Bangladesh offers maintained the lowest capital adequacy ratio (CAR) than other Southern Asian countries-India, Pakistan and Sri Lanka- says the Bangladesh Bank’s Financial Steadiness Report, 2019.
The stability report says the administrative centre adequacy ratio (CAR) of the banking industry stood at 11.6% by the end of December 2019, that was 10.5% a year before.
The country’s banking sector maintained the cheapest CAR in 2019 compared with neighboring countries (India, Pakistan and Sri Lanka), says the report unveiled by the Bangladesh Lender (BB) on June 29.
Last year, the banking industry in Bangladesh taken care of 11.6% CAR, while neighboring India maintained 15.1% CAR; Pakistan maintained 17.0% CAR and Sri Lanka maintained 16.5% CAR.
Low capital adequacy ratio may be the immediate consequence of the banks’ default loans as the banks had to continue to keep their provisioning against default loans, says ex - Finance Adviser to a Caretaker federal government AB Mirza Azizul Islam.
Based on the BB info, default loans stood by Tk94,313 crore at the end of 2019.
He also offers said foreign investors generally screen the ratio of expected capital and default loans of banking institutions before investing in any country. Low capital adequacy ratio discourages them from investing.
In line with the BB guidelines about risk-based capital adequacy, banking institutions have to maintain the very least capital adequacy ratio (CAR)-which is a bank’s capital reserve to cover their risk exposure-of 12.50% by 2019, good BASEL III requirement.
As of December of 2019, the CAR of foreign banking institutions was 24.45%, private banks at 13.62% and state-owned banking institutions were at 4.99%, as per the central bank data.
Total capital adequacy ratio (CAR) in the entire banking sector was not bad at all however the state- run banks plus some fresh banks capital adequacy ratio was not good due to their high quantity of non-performing loans, says Zahid Hussain, past lead economist of the World Bank Bangladesh office.
Only 10 banks away of 60 in the united states hold 63% of most non-performing loans (NPLs) in Bangladesh, says a Bangladesh Bank (BB) recent report.
Of the 10 banks, four are point out owned commercial banks, two point out owned specialized banks, three personal commercial banks, and one foreign commercial bank.
The report, however, didn't mention the labels of the banks.
Among the banks, top five held 45.8% of NPLs, it added.
The report also mentioned that the NPL concentration remained high, with 28% of the NPLs in the trade and commerce sector, although sector received only 21.9% of the full total loans.
The report also said the high gross NPL ratio of 19.7% in the shipbuilding and ship breaking sectors remained another key concern.
Source: https://www.dhakatribune.com
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