The banking sector in Bangladesh in 2024 is undergoing significant turmoil, with some banks experiencing severe financial distress while others maintain their stability and continue to innovate technologically. In this article, we will examine the current state of the sector, categorizing banks into three groups: red zone (high-risk), yellow zone (moderate risk), and green zone (financially stable and safe for business). We will also delve into the technological advancements of certain banks, as digital transformation is increasingly becoming a critical factor for businesses.

1. The Root of the Crisis in Bangladesh’s Banking Sector

The banking crisis in Bangladesh has its roots in a combination of governance failures, loan mismanagement, and systemic weaknesses. One of the most pressing issues has been the rising non-performing loans (NPLs) across many banks, exacerbated by poor risk management and politically influenced lending practices. According to recent reports, NPLs account for nearly 10% of the total banking sector loans, though some analysts suggest the figure could be higher due to hidden or misreported bad loans.

The lack of proper governance in some banks has allowed corruption, fraud, and mismanagement to thrive. Banks that have fallen under the control of powerful corporate conglomerates, such as the S. Alam Group, have seen their financial health deteriorate due to risky lending practices and a lack of oversight. Despite attempts by the Bangladesh Bank to stabilize the sector through regulatory interventions, many banks continue to struggle with liquidity crises and governance challenges.

2. Red Zone Banks: Institutions at High Risk

Banks in the red zone are those facing severe financial distress. These institutions are characterized by high NPL ratios, liquidity crises, and governance issues that undermine their long-term viability. Customers and businesses should exercise caution when dealing with these banks, as their financial future is uncertain.

Key Red Zone Banks:

• Janata Bank: One of the largest public sector banks, Janata Bank is struggling with a high volume of defaulted loans and liquidity problems, placing it firmly in the red zone.
• Sonali Bank: Another public sector giant, Sonali Bank faces severe liquidity shortages, and its financial health is deteriorating.
• Social Islami Bank Limited (SIBL): SIBL concealed nearly Tk 7,924 crore in bad loans and is currently under review for a potential downgrade. This bank has major governance issues and liquidity problems.
• Basic Bank: With a long history of corruption and fraudulent activities, Basic Bank is considered one of the riskiest institutions in the banking sector.

3. Yellow Zone Banks: Moderate Risk, But Recovering

Yellow zone banks are those that are at moderate risk but are showing signs of improvement. These banks may still face some challenges, particularly with loan defaults or governance, but they are on a recovery path.

Key Yellow Zone Banks:

• Al-Arafah Islami Bank: Al-Arafah Islami Bank has recently undergone restructuring to address governance issues. While it still faces liquidity challenges, it is showing signs of recovery.
• Agrani Bank: Agrani Bank, a state-owned institution, is in better shape than many of its peers but still has challenges related to NPLs and corporate governance.

4. Green Zone Banks: Financially Stable and Safe for Business

Green zone banks are financially stable and present a low risk to both individuals and businesses. These banks are characterized by good governance, strong liquidity, and relatively low levels of NPLs. Businesses seeking reliable banking partners should prioritize these institutions.

Key Green Zone Banks:

• BRAC Bank: BRAC Bank is known for its strong SME focus, financial stability, and technological leadership. It remains one of the safest choices for businesses in Bangladesh.
• Eastern Bank Limited (EBL): With a strong capital base and excellent liquidity, EBL is a trusted banking partner for both corporate and retail clients.
• HSBC Bangladesh: As part of a global banking network, HSBC provides top-tier financial services, particularly for businesses with international operations.
• Prime Bank: Prime Bank has shown consistent financial performance and is regarded as one of the most stable private banks in the country.
• City Bank: City Bank continues to innovate while maintaining a strong financial base, making it a reliable choice for businesses.

5. Technologically Strong Banks: Leading Digital Innovation

In addition to financial stability, technological capabilities are increasingly important for businesses. Banks that offer robust digital banking services can provide seamless, efficient, and secure transactions, which are crucial for today’s fast-paced business environment.

Top Technologically Strong Banks:

• BRAC Bank: BRAC Bank’s mobile banking and online services are some of the best in the industry, providing businesses with smooth and secure financial operations.
• Dutch-Bangla Bank Limited (DBBL): DBBL is a pioneer in digital banking, with the largest ATM network and advanced mobile financial services, making it a top choice for businesses relying on technology.
• Bank Asia: Bank Asia offers a wide range of online and mobile banking solutions, providing businesses with efficient and secure transaction services.
• Standard Chartered Bank Bangladesh: Known for its global network, Standard Chartered provides advanced digital banking services that cater to both local and international business needs.
• Eastern Bank Limited (EBL): EBL’s digital banking services are designed to offer convenience and efficiency, ensuring smooth transactions for businesses.

Conclusion: Choosing the Right Bank for Your Business

In conclusion, businesses should carefully consider the financial stability and technological capabilities of banks when choosing a banking partner. **Green zone banks** such as BRAC Bank, Eastern Bank Limited, and HSBC offer the best combination of stability and service, while technologically strong banks like Dutch-Bangla Bank and Bank Asia lead the way in providing efficient digital solutions. It is important to avoid **red zone banks** like Social Islami Bank and Janata Bank, as they face significant financial and governance challenges.