Dhaka, Bangladesh (BBN)– Non-performing loan (NPL) net of provisions to capital in Bangladesh’s banking sector is higher than in India and Sri Lanka.
Among the three countries, the banking sector of Bangladesh scored higher NPL net of provisions to capital during the last five years, according to a Bangladesh Bank (BB) study, prepared by Ala Uddin and Shamima Sharmin.
Among the three countries, the banking sector of Bangladesh scored higher NPL net of provisions to capital during the last five years, according to a study prepared by Ala Uddin and Shamima Sharmin of Bangladesh Bank (BB), the country’s central bank.
“This could be treated as a concern for the banking sector of Bangladesh,” the researchers say in the study report.
The research paper, styled ‘Banking Sector Soundness and Financial Stability: The Cases of Bangladesh, India and Sri Lanka’, was presented in a plenary session on banking at the two-day International Conference for Bankers and Academics (ICBA).
Higher credit-portfolio loss serves as a stain in smooth financial intermediation process, according to the findings.
“Banking system of Sri Lanka demonstrated a relatively lower NPL ratio compared to that in Bangladesh and India during the last five year,” it noted.
Higher NPL ratio might serve as hindrances to reducing financial- intermediation cost in Bangladesh, the researchers explained.
Banking sectors of both India and Sri Lanka are in a much better position in terms of capital adequacy, asset quality, and liquidity compared to those in the Bangladesh banking system, according to the paper.
“Interestingly, all these three countries have mostly implemented international standards regarding capital adequacy and liquidity,” it noted.
Three more papers, including Determinants of Bank Interest Spread in Bangladesh, were presented in the session with SK Sur Chowdhury, deputy governor of the BB, in the chair.
While Bangladesh has been successful in introducing Basel-III capital and liquidity frameworks like India and Sri Lanka, it has been lagging behind its peers in introducing advanced tools to assess its financial stability and resilience, according to the findings laid down in the paper.