Weak oversight fuels surge in bad loans
Non-performing loans (NPLs) in Bangladesh’s banking sector crossed Tk 6 lakh crore in June, rising by Tk 17,851 crore in three months despite various policy measures extended to borrowers, underscoring persistent weaknesses in credit management and loan recovery. Classified loans stood at Tk 6,06,555 crore as of June 30, up from Tk 5,88,704 crore at the end of March, according to Bangladesh Bank statistics released on Wednesday.
The share of classified loans in total outstanding loans rose to 32.78% in June from 32.26% three months earlier, meaning nearly one-third of loans in the banking system were classified as non-performing.
Total outstanding loans crossed Tk 18.5 lakh crore in June, compared with Tk 18,24,668 crore in March.
The continued rise in bad loans has renewed concerns over asset quality, loan management and the financial stability of the banking sector. It also raises questions about the effectiveness of repeated policy support provided to borrowers without a corresponding improvement in repayment discipline.
An economist said the increase in NPLs reflected a lack of strict action against major defaulters. Large business groups often cite global and domestic economic difficulties to seek policy support, the economist said, but do not necessarily use the facilities to settle their outstanding debts.
NPLs stood at Tk 5,57,217 crore at the end of December 2025, meaning bad loans increased by Tk 49,338 crore during the first six months of 2026.
At the end of June 2025, NPLs stood at Tk 5,30,428 crore, representing an annual increase of Tk 76,127 crore.
A central bank official, speaking on condition of anonymity, said the actual volume of distressed loans could be considerably higher if Bangladesh Bank had not relaxed loan-classification rules.
The scale of deterioration is particularly striking over the longer term. NPLs have increased more than 27-fold in about 17 years.
When the Bangladesh Awami League formed the government in 2009, defaulted loans stood at Tk 22,481 crore. The figure rose to Tk 42,725 crore in June 2012 and crossed the Tk 1 lakh crore threshold for the first time in March 2019, reaching Tk 1.09 lakh crore.
Banking-sector insiders have long alleged that political influence and weak governance contributed to widespread loan mismanagement during the previous Awami League-led government.
They said minimum standards of corporate governance and credit discipline were frequently undermined by political pressure on bank boards and management.
They have also alleged that large amounts of bank funds were diverted through loans and subsequently laundered abroad. Such allegations have been raised particularly in relation to politically connected business groups, although individual cases require investigation and due process.
The banking sector has faced further deterioration since the fall of the Awami League-led government on Aug. 5, 2024. The departure of some prominent businessmen, the closure or disruption of businesses and difficulties in recovering loans from large borrowers have contributed to the increase in classified loans.
Large borrowers, including S Alam, Beximco, AnonTex, Abdul Monem, Nassa Group and Sikder Group, have defaulted on loans on a large scale since the political change in August 2024, according to banking-sector sources.
The latest figures highlight a long-standing problem extending beyond individual borrowers: weak credit appraisal, inadequate monitoring, political influence, repeated loan rescheduling and limited recovery action have allowed bad loans to accumulate over years.
The challenge for Bangladesh’s banking authorities is now to restore credit discipline, strengthen governance and recover distressed loans while ensuring that genuine businesses facing temporary difficulties are not deprived of necessary financing.
Without stronger enforcement and improved risk management, continued growth in NPLs could further weaken banks’ balance sheets, constrain new lending and increase risks to the wider economy.
