Bad loans, bigger questions

THE banking crisis has reached a point where another round of restructuring, rescheduling and promises of reform will not suffice.

When 10 of the country’s 61 banks account for more than 72 per cent of the sector’s Tk6.07 lakh crore in non-performing loans (NPLs), the question is no longer simply how the banking system went wrong.

It is who allowed it to happen, who benefited from it and who will be held responsible.

The scale of the damage is staggering.

The New Nation on Friday reported that the NPLs rose by Tk17,851crore in just three months to June.

At some banks, the deterioration is virtually total: First Security Islami Bank and Union Bank had NPL ratios of 97.08 per cent and 96.78 per cent respectively

. Islami Bank alone carried nearly Tk99,000crore in bad loans, while Janata Bank had Tk75,728 crore.

These figures cannot plausibly be attributed to ordinary business failures alone.

Years of politically connected lending, excessive exposure to powerful business groups, inadequate scrutiny and weak recovery mechanisms point to serious failures of governance.

Where loans were approved despite obvious risks, those who authorised them must be identified and investigated.

Where funds were diverted or obtained through fraud, borrowers and facilitators alike must face the law.

The government must therefore publish credible, bank-by-bank assessments of major NPLs and disclose the beneficial interests behind politically connected and related-party lending, subject to due legal process.

Recovery efforts should prioritise tracing diverted assets and pursuing wilful defaulters rather than repeatedly granting them extensions.

Restructuring has a legitimate role when a viable business faces temporary distress.

It must not become a mechanism for concealing insolvency or protecting influential borrowers.

The World Bank’s finding that Bangladesh’s NPL ratio reached 32.6 per cent in March 2026, against a South Asian average of 7.9 per cent, underlines the exceptional nature of the crisis.

The public should not be asked to bear the cost of private misconduct and institutional failure.

Bank reform must mean recovery of public money, prosecution where wrongdoing is established, removal of compromised management and genuine regulatory accountability.

Without accountability, restructuring will merely reset the clock on the next banking crisis.