Central Bank unveils ADR policy to speed up loan recovery

In an effort to speed up the recovery of defaulted loans and reduce the number of pending lawsuits in courts, Bangladesh Bank (BB) yesterday unveiled a guideline to enlist firms willing to mediate between borrowers and lenders through out-of-court settlements.

The central bank issued the Alternative Dispute Resolution (ADR) Mediator Enlistment Guidelines, 2026, five months after it issued a notification on the selection of mediators for pre-suit mediation to enable banks to recover mounting bad loans, which rose to 32.26 percent of total outstanding loans at the end of March this year.

In monetary value, total classified loans stood at Tk 588,700 crore at the end of March, up from Tk 557,217 crore in December last year.

By the end of 2025, bank loans tied up under court stay orders stood at Tk 182,419 crore, growing more than eightfold in three years, according to BB data.

Yesterday, the central bank said a specific policy framework to verify the qualifications, capacity, and suitability of third-party organisations wishing to conduct these mediations was necessary to ensure a structured process, enforce strict professional and ethical standards, and build public trust in the mediation system.

ADR, or out-of-court mediation, is expected to play a critical role in recovering outstanding loans and clearing the backlog of loan-related court cases.

The BB said an applicant institution must be registered under the Societies Registration Act, 1860, the Partnership Act, 1932, or the Companies Act, 1994, to be eligible for enlistment.

The applicant must have at least three years of business or professional experience at the time of submitting the application, along with an up-to-date trade licence and a tax identification number.

The central bank said no owner, director, or chief executive of the applying institution can be bankrupt, a loan defaulter, or convicted of serious criminal offences, including fraud, corruption, embezzlement, and money laundering.

The BB said interested institutions must maintain at least one panel of mediators consisting of at least five members. The panel must include at least one accountant and one legal expert.

The mediators must have at least 10 years of experience in banking, finance, law, accounting, auditing, or judicial service.

Politically exposed persons cannot be included in the mediator panel, the BB said.
The central bank said mediator institutions must have proper physical and technological infrastructure to function effectively.