The banking sector has been bleeding with a catastrophic provision shortfall that reached Tk170,655 crore as of March 2025.
Banks maintain only 37.97 per cent of required provisions. This represents a devastating collapse from December's already inadequate 50.75 per cent coverage ratio, according to Bangladesh Bank's (BB) latest statistics.
Banks require Tk275,1032.87 crore in provisions but hold merely Tk104,447.55 crore, creating a gap that widens by the day as classified loans multiply across every category of lenders. This provision deficit has exploded by Tk 64,524.50 crore in just three months, demonstrating how rapidly the crisis accelerates beyond regulatory control.
State-owned commercial banks lead this march toward insolvency with provisions covering just 31.47 percent of their required reserves. These institutions face a staggering provision shortfall Tk 63,996.55 crore against classified loans that continue expanding without effective intervention. Their provision requirements demand was Tk93,383 crore while they maintain only Tk 29,386.45 crore, proving that government ownership provides no immunity to them from financial misconduct.
Meanwhile, provision shortfall of private commercial banks reached Tk 107,340.03 crore though their 39.20 per cent coverage ratio marginally exceeds the state banks' dismal performance. These private sector lenders require Tk176,556.38 crore in provisions but hold only Tk 69,216.35 crore, revealing how the entire commercial banking structure operates on fundamentally unsound principles that prioritize short-term profits over long-term stability.
Foreign banks stand as the sole exception to this institutional breakdown, maintaining 118.64 per cent provision coverage and creating a surplus of Tk432.87 crore that highlights the stark contrast between international banking standards and local practices.
Besides, specialized banks similarly exceed requirements with 108.74 per cent coverage and maintain a Tk 248.41 crore surplus provision, proving that adequate provisioning remains achievable when institutions prioritize financial discipline over reckless lending.
Provision shortfall grows exponentially because banks continue lending while failing to set aside adequate reserves against non-performing loans.
Regulatory interventions through BRPD circular 09/2024 extending loan repayment terms only mask the underlying provision crisis while Bangladesh Bank's inspection department reclassifies additional loans as non-performing.
Borrowers fail to renew current loans while rescheduled installments remain unpaid, creating a cascading effect that demands ever-higher provision requirements from institutions already operating with inadequate reserves.
This provision crisis represents the most severe threat to Bangladesh's banking stability in decades. Banks operating with less than 40 per cent provision coverage are essentially gambling with depositor funds while regulatory authorities watch the system collapse in slow motion according to a senior banking analyst.
