MD MEHEDI HASAN

The provision shortfall in the banking sector has increased more than six times to Tk 170,655 crore over the past year, Bangladesh Bank data show, exposing the fragile financial health of commercial lenders due mainly to large-scale scams and irregularities during the previous regime.

Banks and financial institutions are required to set aside sufficient funds, or provisions, to cover potential losses from loans, especially those that turn sour, and safeguard the interest of depositors.

A shortfall occurs when they fail to keep enough aside to meet these obligations.

By March this year, banks were required to set aside Tk 275,103 crore in provisions. But they managed only Tk 104,448 crore, leaving a shortfall of Tk 170,655 crore, according to the Bangladesh Bank (BB) data.

A year earlier, the shortfall stood at Tk 26,585 crore, while it was Tk 106,130 crore at the end of December last year.

BB officials said the spike in non-performing loans (NPLs) has driven the shortfall. High levels of bad loans mean banks need larger provisions, which eat into profits.

They added that a provision shortfall also points to weak financial management.

Bad loans in the banking sector reached a record Tk 420,335 crore at the end of March.

Compared with a year earlier, the amount more than doubled, although total loans rose just 6.2 percent over the same period.

Alone in the first quarter of this year, bad loans jumped by Tk 74,570 crore. As of March, total loans in the banking sector amounted to Tk 1,741,992 crore, of which 24.13 percent were BB officials They