Bangladesh’s banking sector has reached its weakest capital position on record, with the Capital to Risk-Weighted Assets Ratio falling to 1.56 per cent in September 2025 — far below the regulatory minimum of 10 per cent under the Basel III framework, according to Bangladesh Bank data.
The ratio reflects that a significant portion of banks are effectively insolvent and unable to endure even minor financial shocks.
The ratio was 11.64 per cent in December 2023. It dropped sharply to 3.08 per cent in December 2024, slightly improved to 4.47 per cent in June 2025 and then fell again to 1.56 per cent in September.
The figure was the lowest level since Bangladesh adopted the Basel III framework in 2014.
CRAR measures how much capital a bank holds against its risk exposure.
CRAR reflects the ratio of regulatory capital—comprising Tier-1 capital (paid-up capital, statutory reserves, retained earnings) and Tier-2 capital (subordinated debt, general provisions)—to risk-weighted assets (RWA), which include loans, investments and operational liabilities weighted by how risky they are.
Under Bangladesh Bank rules, banks must maintain at least 10 per cent CRAR, along with an additional 2.5 per cent capital conservation buffer. Instead of meeting the 12.5 per cent combined threshold, the sector now operates far below even the minimum requirement.
The sharp fall means many banks no longer have enough capital to absorb losses.
According to the Quarterly Financial Stability Assessment Report for July–September 2025, 21 out of 61 banks failed to meet the minimum 10 per cent requirement at the end of September.
Of them, 15 reported negative CRARs, meaning their losses have wiped out core capital. Bankers said such institutions have little capacity to cope with further loan defaults and resemble hollow structures rather than viable banks.
The main reason behind the collapse is the rapid rise in default loans. Non-performing loans surged to Tk 6.44 lakh crore by September 2025, accounting for about 36 per cent of total outstanding loans.
The figure was Tk 2.85 lakh crore in September 2024 and Tk 3.45 lakh crore in December 2024.
As bad loans increased, banks had to set aside more provisions, which reduced their capital.
Bankers attributed the deterioration to years of aggressive lending, weak credit scrutiny, governance failures and political interference.
Large borrowers received repeated rescheduling and regulatory forbearance, which masked stress on bank balance sheets. As those accounts turned non-performing, capital eroded quickly.
Stress tests by Bangladesh Bank showed how fragile the sector has become.
The default of the two largest borrowers would pose the biggest threat to capital adequacy.
In a combined shock scenario, including credit and market risks, the sector’s CRAR would fall to negative 1.18 per cent.
Liquidity tests also found that 18 banks would fail to survive five consecutive days of deposit withdrawals.
Experts said that the weak capital base has serious implications. Banks with low or negative CRAR cannot expand lending, which may slow investment and economic activity. Depositor confidence may weaken, raising funding pressure.
In response to severe capital shortfalls and bleak financial health, Bangladesh Bank has moved to merge five crisis-hit shariah-based banks into Sammilito Islami Bank as part of efforts to stabilise the sector.
