Country's economic gloom cast shadow over banking sector performance as major health indicators of most banks deteriorated significantly eroding their capacity to maintain the provision that they need to cover loan loss putting depositors' money at risk.
The provision shortfall that maintained from banks' profit to pay for anticipated future losses and default loans surged to by Tk 1000 crore to nearly Tk 20,000 crore at the end of September from June, according to the Bangladesh Bank data.
The rising provision shortfall will weaken banks' capital which will ultimately erode lenders' capacity to pay back money to depositors.
The deterioration of banking sector performance eroded depositors' confidence creating fund withdrawal pressure amid ongoing overall economic crisis.
Ami this situation, the Bangladesh Bank this week issued a notice to restore depositors' confidence saying that people's deposits are safe in banks across the country.
In an urgent cautionary notice, Bangladesh Bank said that conspiratorial information was being disseminated on various social media provoking people to withdraw their deposits from banks.
Cautioning people against such misinformation, the Bangladesh Bank assured that the country's banking system is in a robust state.
The surge in default loans increased provision requirement for banks widening the shortfall amount.
The total default loan increased by over Tk 31,000 crore to Tk 1.34 lakh crore in first nine months of the current year, according to the Bangladesh Bank data.
The payment failure amid production halt caused by energy crisis pushed up default loan in the recent months, said bankers.
In September, 8 banks were in provision shortfall but most private banks experienced reduction in surplus provision amount. Moreover, some banks showed no shortfall by taking provision forbearance from the Bangladesh Bank.
The most listed private commercial banks which disbursed good amount of dividend in last two years during pandemic taking advantage of relaxed policy are now under stress of maintaining provision amid rising default loan.
The average provision shortfall of private banks increased to Tk 3,345 crore in September from Tk 3,111 crore in June this year, central bank data shows.
Four private commercial banks including National, Mutual Trust, Bangladesh Commerce, Standard bank mainly accounted for the provision shortfall in September. Of them National bank which has strong deposit base of Tk 44,000 crore alone accounted for Tk 7,400 crore provision shortfall in September.
Some 38 banks which were not in shortfall but maintained small amount of surplus amount of highest Tk 10 crore. Only 10 banks were able to maintain good amount of provision surplus above Tk 100 crore, central bank data shows.
The provision shortfall of four state owned banks including Agrani, Janata, Rupali and Basic increased to Tk 11,696 crore in September from Tk 11,017 crore in June.