Bangladesh banks' negative capital adequacy weakest in South Asia, could worsen further: Report
New Delhi, June 18
Bangladesh's banking sector slipped into a crisis at the end of 2025, with the capital adequacy ratio falling to minus 2.64 per cent, after a wave of previously concealed bad loans came to light, making them the weakest in South Asia to absorb financial shocks, a new report has said.
By comparison, CRAR stood at 17.20 per cent in India, 20.80 per cent in Pakistan and 19.40 per cent in Sri Lanka at the end of 2025, the report from Bangladesh-based The Daily Star said.
A large number of previously hidden bad loans came to light following the fall of the Awami League-led government in August 2024, the media house said.
Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank and a former chairman of the Association of Bankers, Bangladesh (ABB) attributed the negative capital position of the banking sector to widespread financial scams.
He said many banks have availed regulatory deferral facilities, which allow them to delay recognising losses or meeting certain regulatory requirements and warned that the financial position of banks could worsen further once these facilities expire.
The capital adequacy ratio, also known as the Capital to Risk-Weighted Assets Ratio (CRAR), measures capital held by banks as a safety cushion against risky lending. A bank's capital buffer to absorb losses if borrowers fail to repay loans is measured by CRAR.
Under international Basel III rules, banks are expected to maintain a minimum capital adequacy ratio of 10 percent, plus an additional 2.5 percent buffer to protect against financial stress.
Non‑performing loans are the main pressure point of Bangladesh banks as bad loans rose to Tk 5,57,217 crore or 30.60 per cent of total loans at the end of 2025 and climbed further to Tk 588,704 crore (32.26 per cent) by March 2026, Bangladesh Bank data showed.
"If policymakers want to restore the banking sector to a healthy and sustainable position, there is no alternative to taking strong and decisive corrective measures," said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM) and a former chief economist of the Bangladesh Bank.
— IANS
Reader Comments
The scale is staggering—bad loans at 32.26% of total loans by March 2026! That's almost one-third of all loans gone bad. And the regulatory deferral facilities are just kicking the can down the road. When those expire, it could be catastrophic. Bangladesh needs strong leadership from its central bank and probably some international assistance, but first they need to clean up the scams Syed Mahbubur Rahman mentioned. Transparency is key.
As an outsider looking in, it's interesting to see how political change can expose financial rot. The fall of the Awami League government in 2024 seems to have peeled back the curtain on massive hidden NPLs. India has had its own NPL problems in the past (remember the 2015-17 twin balance sheet crisis?), but our reforms like the Insolvency and Bankruptcy Code helped. Bangladesh could learn from that, but their situation seems much more acute. A negative CRAR means banks can't even absorb normal losses—scary stuff.
What good is a 20.80% CRAR for Pakistan if their economy is still struggling? 😅 Numbers are important, but the real test is whether these buffers actually protect depositors. For Bangladesh, with a negative ratio, the situation is truly dire. I feel for the common people there who might lose their savings if banks fail. The government must act decisively—maybe merge weak banks or force recapitalization. India's experience with bank consolidation could offer a template.
The article highlights a systemic failure in Bangladesh's banking governance. The fact that bad loans surged to Tk 5,57,217 crore (over ₹5.5 lakh crore in Indian terms) after the political change suggests deliberate under-reporting during the previous regime. Strong corrective measures are non-negotiable, as Mustafa K Mujeri said. But I wonder if Bangladesh's economy can handle the shock therapy required—financial crises always hurt the
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