Election seen as lifeline as banks in crisis
Gazi Anowar :
Bangladesh’s banking sector is under mounting pressure as non-performing loans (NPLs) surge and private-sector credit growth remains subdued. According to Bangladesh Bank, the ratio of NPLs across all banks rose sharply to 16.93 per cent in the first quarter of FY25, while the absolute value of bad loans increased by 34.8 per cent year-on-year to Tk 2.85 trillion.
Private-sector lending has shown little dynamism. World Bank data indicate that credit to the private sector has hovered around 45 per cent of GDP since 2016, markedly lower than regional peers such as India, Vietnam, and Thailand. Economists suggest this stagnation reflects reluctance among businesses to borrow amid political uncertainty and weak investor confidence.
“A credible political process is crucial for reviving the investment climate,” said Professor Abu Ahmed, Chairman of the Board of Directors at the Investment Corporation of Bangladesh (ICB). “Without stability and predictability, no serious investor will risk long-term capital. The banking sector is effectively hostage to political uncertainty.”
Syed Mizanur Rahman, Managing Director and CEO of AB Bank, echoed these concerns, noting, “An election will restore confidence in law and order and business prospects. Borrowers will be under pressure to clean up their accounts, and investors will start committing capital again. We believe the economy can bounce back strongly once political stability returns.”
In fact, investment demand in Bangladesh has remained subdued over the past year, leaving banks grappling with slow credit growth and a rising stock of NPLs. Many analysts believe a national election could act as a turning point, encouraging defaulters to reschedule loans and prompting new private-sector investment.
Data from Bangladesh Bank show that total investments held by scheduled banks-including treasury bills, bonds, and equities-rose from Tk 4.29 trillion in June 2024 to Tk 5.52 trillion in June 2025, a year-on-year increase of 28.8 per cent. However, economists caution that much of this growth reflects banks’ expanding exposure to government securities rather than increased lending to the private sector.
Several banks with particularly high NPLs are counting on political stability to improve repayment behaviour.
IFIC Bank, National Bank, BASIC Bank, and Padma Bank have all been flagged for serious asset quality concerns. Recent figures show that IFIC Bank’s default loans now account for 58 per cent of its portfolio, while National Bank’s NPL ratio has exceeded 64 per cent.
Although the latest data for BASIC Bank and Padma Bank are unavailable, both institutions are long associated with high loan defaults and deposit instability.
For now, banks remain in a holding pattern, increasing their investments in government securities while awaiting clearer signs of political stability. Analysts warn that until private-sector confidence is restored, credit growth is likely to remain muted, constraining broader economic momentum.
