The alarming surge in non-performing loans (NPLs) within Bangladesh’s banking sector, now standing at Tk 3,45,765 crore, signals a deepening crisis that demands urgent attention.
Our newspaper on Thursday reported that representing 20.2 per cent of total outstanding loans, this figure is not merely a statistic; it reflects a systemic failure that has been years in the making.
The recent data from Bangladesh Bank reveals a staggering increase of Tk 2 lakh crore in defaulted loans over the past year alone. This dramatic rise can be traced back to a culture of opacity and mismanagement that has plagued the banking sector, particularly during the tenure of the previous Awami League government. Allegations of preferential treatment for influential individuals, coupled with a lack of governance and credit discipline, have created an environment ripe for financial malpractice.
The central bank’s decision to revise loan classification policies — reducing the overdue period from 270 days to 180 days and soon to 90 days — aims to bring transparency to a sector long shrouded in secrecy. However, this move also means that the true extent of the crisis is only beginning to surface. The Governor of Bangladesh Bank, Dr Ahsan H. Mansur, has acknowledged that the ratio of bad loans is likely to continue rising as the institution strives to eliminate the “culture of hiding” bad debts.
The implications of this crisis are profound. With state-owned banks reporting that 42 per cent of their loans are non-performing, the stability of the entire banking system is at stake. The Centre for Policy Dialogue’s estimate of Tk 92,261 crore embezzled in major banking scams between 2008 and 2023 underscores the scale of the problem.
This amount is equivalent to 12 per cent of Bangladesh’s national budget for FY24, highlighting the urgent need for accountability and reform.
Economist Prof Muinul Islam’s assertion that the actual amount of defaulted loans may exceed Tk 6 lakh crore raises further concerns. With a significant portion tied up in unresolved lawsuits, the true financial health of the banking sector remains obscured.
As the country navigates this turbulent financial landscape, the new government must prioritise transparency, accountability, and robust governance in the banking sector.
The time for complacency has passed; decisive action is needed to restore public confidence and ensure the stability of the nation’s financial system.
