Banking rector review: IMF flags rising non-performing loans
Staff reporter :
The International Monetary Fund (IMF) delegation welcomed Bangladesh’s transparency in revealing the full extent of hidden loan defaults. Despite Bangladesh Bank’s earlier assurances to curb them by next year, non-performing loans (NPLs) in the country continue to surge uncontrollably.
At a meeting held at Bangladesh Bank on Thursday, October 30, the IMF voiced concerns over the creation of the Export Development Fund (EDF) using foreign exchange reserves, along with related refinancing and pre-financing facilities.
The delegation was led by Chris Papagiorgio, Head of the IMF’s Development Macroeconomics Department, and included Bangladesh Bank Deputy Governor Dr. Habibur Rahman, Research Department Executive Director Dr. Ejazul Islam, and other officials.
Sources say that under the IMF’s $4.7 billion loan agreement, NPLs in government banks are required to be reduced below 10 percent.
However, following the change of government in August last year, the true extent of hidden non-performing loans started to surface.
By the end of June 2025, defaulted loans had surged to Tk 667,000 crore — about Tk 4 lakh crore higher than the previous year. At present, the default rate in state-owned banks exceeds 40 percent, while private banks’ NPLs stand above 10 percent.
The IMF delegation also requested detailed updates on Bangladesh’s monetary policy framework, inflation management, interest rates, liquidity support, and reserve operations.
While acknowledging the recent drop in inflation, the organization cautioned that tight policies should not hinder long-term investment.
The team further sought information on the financial condition of six state-owned banks, the liquidity crunch in the banking sector, provisioning gaps, recapitalization plans, foreign exchange management, and strategies for green economy investments.
Bangladesh Bank Assistant Spokesperson Shahriar Siddiqui stated that the IMF’s fifth review mission is visiting regularly to monitor progress on loan conditions. The delegation is closely reviewing efforts to control inflation, regulate interest rates, maintain liquidity, manage reserves efficiently, and reduce non-performing loans.
The discussions highlighted the significant challenges Bangladesh faces in stabilizing its banking sector while implementing the fiscal and economic reforms required under the IMF program.