BD tops Asia in default loans: ADB
Staff Reporter :
A new report from the Asian Development Bank (ADB) has revealed that Bangladesh now ranks highest in Asia in terms of defaulted loans.
The report compares the 2023 financial indicators of countries across Asia and the Pacific, showing Bangladesh at the top of the default loan list.
Sources note that following the fall of the Awami League government in August last year, many hidden defaults within the banking sector have come to light. Loans taken by Awami League leaders and their allied businessmen have also turned into defaults.
As a result, the share of defaulted loans in the banking sector has surged from 12pc to over 28pc in just one year – meaning more than a quarter of total bank loans are now in default. Bangladesh Bank officials explain that much of the money siphoned off during the previous Awami League government is now being exposed as defaults.
Defaults have also risen due to Bangladesh adopting international standards in loan classification, which has forced many renewed
loans to be marked as non-recoverable.
The central bank has tightened its scrutiny, categorizing many irregular loans as defaults, which is pushing the figure higher – and it may climb further.
When the Awami League came to power in 2009, total defaulted loans stood at just Tk22,481 crore. Since then, the number has grown steadily. Economists have long alleged that politically connected individuals extracted vast sums from banks through irregularities, much of which was smuggled abroad.
After the recent political shift, the real situation of banks once under the grip of Chattogram-based S Alam Group – a business conglomerate linked to the Awami League – has begun to emerge. Islami Bank has recorded the sharpest rise in defaults, followed by First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and Exim Bank. Bangladesh Bank has already initiated plans to merge these five banks.
Defaults are also swelling in state-owned banks Agrani and Janata, and in private banks such as IFIC, UCB, NRB, and NRB Commercial. Around 1,400 defaulted companies have applied to Bangladesh Bank for restructuring, of which about 300 have been approved.
To address the crisis, Bangladesh Bank is preparing a new loan restructuring policy. Under this, borrowers may restructure loans by depositing just 1pc of the outstanding amount, though they must pay interest during the grace period. Officials hope this step will help bring down defaults.
According to the ADB, Bangladesh has the highest default rate in South Asia, reaching 9.6pc by the end of 2023. This ratio has been rising steadily since 2021, when it was 8pc, climbing to 8.7pc in 2022. Nepal and Sri Lanka also saw rising defaults during this period, while other countries recorded declines.
For instance, Bhutan’s default rate dropped from 11.7pc in 2020 to 8.7pc in 2022. India’s rate fell from 7.9pc in 2020 to 6.2pc in 2023. Maldives saw the sharpest decline, from 18.8pc to 8.3pc.
ADB figures show that the lowest default rates in Asia are in Chinese Taipei and Hong Kong. After Bangladesh, Kyrgyzstan had the next highest rate, though it improved from 12.5pc in 2022 to 8.9pc in 2023.
Meanwhile, Bangladesh Bank data shows that by the end of 2024, the country’s banking sector default rate stood at 20.20pc. By June, defaults had ballooned to Tk530,428 crore – 27.09pc of all outstanding loans.
At the same time, Taipei and South Korea reported the lowest rates in Asia, at just 0.1pc and 0.2pc, respectively.