Nine banks, including four state-run ones, have fragile financial health, says a recent report of the Bangladesh Bank.

The banks in the 'red zone' are AB, National, Bangladesh Commerce, Padma, BASIC, National Bank of Pakistan, Janata, Agrani and Rupali, according to the latest edition of the "Banks Health Index and HEAT Map", a biannual report prepared by the Financial Stability Department of the BB.

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As many as 29 banks were in the yellow zone, meaning their financial health was between good and fragile, said the report, which brought all banks under a common platform using the international CAMELS rating system.

The CAMELS is used by bank supervisory authorities to rate financial institutions according to six factors represented by its acronym: capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk.

A rating of 1 is considered the best, while a rating of 5 is considered the worst.

The banks in both the red and yellow zones need supervisory attention, the report said.

The yellow zone contains two state-owned commercial banks -- Bangladesh Development Bank and Sonali Bank -- 19 conventional private banks and eight Shariah-based banks.

The 19 private banks are: IFIC, Meghna, One, United Commercial, NRB, NRB Commercial, Mercantile, Mutual Trust, Dutch-Bangla, Premier, BRAC, Southeast, City, Trust, SBAC, Modhumoti, Dhaka, Uttara and Pubali.

The Shariah-based banks in the yellow zone are: First Security Islami, Islami, Social Islami, Al Arafah, Standard, Union, Exim and Global Islami.

There were 16 banks in the green zone, which implies good financial health.

Those are Prime, Eastern, Habib, NCC, Midland, Bank Alfalah, Bank Asia, Shimanto, Jamuna, Shahjalal Islami, Woori, HSBC, Commercial Bank of Ceylon, Citi, Standard Chartered and State Bank of India.

Meanwhile, the health of 38 banks deteriorated during the review period of December 2020 to June 2023, while 16 banks' health improved, according to the BB report, which comes at a time when mergers and acquisitions of weak banks are in discussion.

Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and ICB Islamic Bank are excluded from the analysis because their data sets are different from the rest.

On the other hand, Bengal Commercial Bank, Citizens Bank, Community Bank Bangladesh and Probashi Kallyan Bank are not taken into account due to lack of historical data.

Some banks became very weak due to their loan irregularities and scams, said Moinul Islam, former professor of the University of Chittagong, adding that some people have taken loans from banks and laundered the sum abroad.

Bad loans in the sector stood at upwards of Tk 4 lakh crore, including all kinds of bad loans, he said, adding that the central bank should take strict action against the loan defaulters and weak banks.