A staggering increase in default loans

We are concerned about the rising volume of bad loans in the banking sector, which reached a record Tk 420,335 crore at the end of March. This accounts for 24.13 percent of the sector's total loans of Tk 17,41,992 crore. In other words, nearly one-fourth of all loans have become defaulted, which is staggering. According to the latest central bank data, state-run banks had bad loans amounting to Tk 146,407 crore, making up 46 percent of their total disbursed funds, while private banks faced Tk 264,195 crore in defaults, or 20.16 percent of their loans. Moreover, foreign banks had Tk 3,239 crore in bad loans, while specialised banks had Tk 6,494 crore. Additionally, the banking sector faced a provisioning shortfall of Tk 170,666 crore, further weakening its financial stability.

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Keep a close eye on banks’ health

It should be mentioned that this increase in bad loans is largely the result of irregular lending practices during the now-ousted Awami League government, which are now turning into defaults. Reportedly, the rise in defaulted loans has been driven by various factors, including the rescheduling of term loan maturities through a central bank directive, the reclassification of large loans from certain clients as substandard by the Bank Inspection Department, the failure to reschedule existing loans, delays in repaying instalments of rescheduled loans, and the accrual of interest on already classified loan accounts. The recent tightening of loan classification rules has also contributed to this surge. Whereas previously loans were classified as overdue after 270 days, starting from April 2025, they are to be classified as non-performing after just 90 days. In some cases, defaults have also occurred due to genuine business struggles under global economic pressures.

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Strengthening central bank was necessary, it's now its turn to deliver

When the Awami League assumed power in 2009, the total volume of defaulted loans stood at just Tk 22,481 crore. Since then, the amount has risen steadily. Economists allege that influential figures close to the then-government siphoned large sums from banks through irregular means, much of which was laundered abroad. Moreover, the government allowed banks to conceal the true scale of the crisis. Political appointments, manipulative accounting, nepotism, and a lack of transparency in lending during the AL tenure contributed significantly to the sector's current instability.

We urge the government to take stringent measures to address the growing crisis of non-performing loans. It must act decisively against habitual defaulters and improve financial governance in the sector. At the same time, credible businesses should continue to receive necessary support, while efforts must be made to steadily reduce the volume of bad loans.