Defaulted loans leave many banks facing capital, provisioning deficits, Bangladesh Bank says

The central bank also cites fuel uncertainty, sluggish investment, weak credit demand as challenges to economy

Bangladesh Bank has warned the Parliamentary Standing Committee on the Ministry of Finance that rising defaulted loans have created capital and provision deficits at many banks, increasing instability in the country’s financial sector.

The observations were presented by Bangladesh Bank’s Monetary Policy Department at the first meeting of the committee at the parliament on Sunday.

The central bank also identified uncertainty over fuel supplies, sluggish investment and low demand for credit in the private sector as key domestic challenges to the economy.

Speaking to bdnews24.com after the meeting, committee member Md Saiful Alam said the panel had recommended reducing the policy interest rate to a single digit and reviewing it every six months instead of leaving it unchanged for long periods.

[Updates to follow]