Capital shortfall in 21 banks hits nearly Tk3 lakh crore
Bangladesh Bank data show that the banking sector’s provision shortfall stood at Tk2,05,665 crore in March, up from Tk1,98,260 crore at the end of December 2025. The provision shortfall rose to Tk2,22,357 crore in June.
The capital shortfall in 21 banks rose to nearly Tk2.94 lakh crore in March 2026 from Tk2.74 lakh crore three months earlier, amid a rise in non-performing loans and provisioning requirements.
As some banks have capital surpluses that offset part of the deficits, the banking sector's overall net capital shortfall stood at Tk2.39 lakh crore across 61 banks in March, up about Tk22,000 crore from Tk2.17 lakh crore in December.
Speaking to The Business Standard, bankers and economists said persistent capital shortfalls indicate that a large part of the banking sector remains financially weak, with rising default loans being a major factor behind the deterioration.
"Banks' capital shortfall increases as defaulted loans rise. Banks have to maintain provisions against defaulted loans, which reduces their profits. In other words, continued losses increase the capital shortfall," said Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank.
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Bangladesh Bank data show that the banking sector's provision shortfall stood at Tk2,05,665 crore in March, up from Tk1,98,260 crore at the end of December 2025. The provision shortfall rose to Tk2,22,357 crore in June.
Rising defaulted loans put pressure on capital
The banking sector's capital position has deteriorated over the years due to aggressive lending, weak supervision and loan approvals influenced by political considerations, according to bankers and economists.
When loans become classified as defaulted, banks have to maintain higher provisions against them. For regular or performing loans, banks generally need to maintain provisions of around 1% to 2%, while provisions against classified loans can rise to as much as 100%, depending on their classification.
The provisioning requirement is intended to protect depositors and strengthen banks' ability to absorb potential losses. However, as defaulted loans rise and banks have to set aside more funds as provisions, their profitability and capital positions come under pressure.
Total defaulted loans stood at Tk5,88,704 crore in March 2026, equivalent to 32.26% of total outstanding loans.
Finance Minister Amir Khosru Mahmud Chowdhury told parliament recently that the government was spending around Tk40,000 crore in the current fiscal year to recapitalise weak banks as part of broader efforts to restore discipline and stability to the financial sector.
Capital weakness affects depositors, healthy banks
Zahid Hussain, former lead economist at the World Bank's Dhaka office, said capital shortfalls have two major effects on the banking sector.
"First, depositors lose confidence in banks that have capital shortfalls. Capital is an important indicator that protects depositors' interests and deposits, and adequate capital helps banks withstand shocks. Therefore, negative capital creates risks. Banks with capital shortfalls also cannot conduct business properly," he said.
Second, the economist said, financially sound banks could also come under pressure because lenders and creditors from abroad may become hesitant to extend credit to banks in Bangladesh.
"If one or two banks have capital shortfalls, it may be manageable. But when 20 or 21 banks of the 61 banks have been suffering from capital shortfalls for a long time, it indicates that the banking sector is in a weak position," Zahid said.
CRAR falls deeper into negative territory
The banking sector's capital-to-risk-weighted assets ratio, or CRAR, another key indicator of financial strength, fell to negative 3.17% at the end of March from negative 2.64% in December, according to Bangladesh Bank data.
International regulatory standards require banks to maintain a minimum CRAR of 12.5%.
According to Bangladesh Bank's Financial Stability Report 2025, Pakistan's banking sector had a CRAR of nearly 21% at the end of 2025, while Sri Lanka's exceeded 19%. India's banks had an average CRAR of 17.20%.
Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, said failure to maintain the required regulatory capital, particularly the CRAR, could have serious regulatory, financial and operational consequences.
He said, "If a bank fails to maintain its required regulatory capital, particularly the CRAR, it may face serious regulatory, financial and operational consequences. These may include restrictions on dividend payments and incentive bonuses, deterioration in credit ratings, declining depositor confidence, increased solvency and funding risks, higher costs of doing business, especially in trade finance, and pressure on profitability due to higher provisioning requirements."
Touhidul further said, "Inadequate capital may also limit lending capacity and reduce the bank's ability to absorb losses."
First Security Islami Bank tops shortfall list
First Security Islami Bank recorded the highest capital deficit in the country at Tk66,264.80 crore as of March 2026. Bangladesh Krishi Bank followed with a shortfall of Tk31,687.17 crore, while Social Islami Bank reported Tk30,936.67 crore.
Among other major default-ridden institutions, Union Bank faced a deficit of Tk30,594.56 crore, Exim Bank Tk30,302.23 crore, Janata Bank Tk18,354.90 crore, Global Islami Bank Tk16,297.61 crore, National Bank Tk11,984.98 crore, AB Bank Tk8,487.59 crore, and Agrani Bank Tk8,234.92 crore.
