The amount of non-performing loans in the country鈥檚 banking sector has soared by Tk聽74,570 crore in just three months to reach Tk 4.20 lakh crore at the end of March 2025, according to the Bangladesh Bank.
Experts said that a massive amount of NPLs surfaced after the central bank had begun revealing the actual financial condition of banks following the ouster of authoritarian Awami League regime under which politically connected large bank borrowers had enjoyed undue privileges and regulatory leniency.
BB officials observed that the recent political unrests and economic stagnation also worsened the situation, making it difficult for many businesspeople to meet their loan repayment obligations.
Experts said that a huge amount of defaulted loans had been swept under the carpet through data manipulation, regulatory forbearance and frequent rescheduling during the AL regime which was ousted on August 5, 2024, amid a student-led mass uprising.
The non-performing loan figure has nearly doubled in a year, climbing to Tk聽4.20 lakh crore in March 2025 from Tk聽1.82 lakh crore in March 2024, according to the BB data.
In December 2023, the amount was Tk聽1.45 lakh crore, which grew rapidly to Tk 2.11 lakh crore by June, and Tk聽3.45 lakh crore by December 2024, before ballooning further this year.
When the Awami League came to power in 2009, the total amount of NPLs was Tk聽22,481 crore.
Non-performing loans now account for 24.13 per cent of total loans disbursed by the country鈥檚 banks, placing Bangladesh at the top of South Asia鈥檚 list of worst-performing banking systems.
M Masrur Reaz, chairman of the Policy Exchange Bangladesh, said the explosive growth in bad loans reflected a collapse in credit discipline and governance, enabled by politically backed cronyism during the AL regime.
He warned that the situation might worsen as the central bank intensified inspections, corrected false reporting and began asset reviews.
Reaz said that while the practice of loan-related corruption might have stopped, the banking sector remained vulnerable under the weight of a legacy of toxic loans.
He urged the central bank to take swift legal action against wilful defaulters and suggested forming an asset management company to handle loan recovery more efficiently.
The Bangladesh Bank, in a statement on Sunday, attributed part of the increase in NPLs to a revision in classification rules.
Under a central bank circular, the period before a loan is marked as default was shortened from 270 days to 180 days in September 2024. On April 1, 2025, the threshold was tightened further to 90 days in line with international standards.
The BB also said that its bank inspection department had recently reclassified several large loans as non-performing after on-site audits.
The increase was also fuelled by borrowers failing to renew their revolving credit facilities on time, delays in repayment of instalments under previously rescheduled loans, and the accrual of interest against loans already under adverse classification.
The state-owned banks appear to be in the worst condition, with nearly 45 per cent of their total loans now classified as defaulted. For the private banks, 20.16 per cent of loans is non-performing, the Bangladesh Bank data show.
Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, said that many bad loans were likely to surface in the coming months as proper auditing by the central bank continued.
He, however, criticised the central bank for failing to lay out a clear plan to address the crisis and warned that many banks might struggle to maintain adequate provisions against their defaulted loans, undermining their financial stability.
He also said that no meaningful action had been taken yet against those responsible for the widespread bank loan defaulting and scams.
According to BB officials, the crisis of loan defaulting has stemmed from years of malpractice during the Awami League-led government.
They said that a significant amount of money was siphoned out of the banking system under fictitious names, and that regulatory forbearance allowed defaulters to repeatedly reschedule loans and avoid classification.
The BB has identified several large conglomerates, including Beximco Group, Bashundhara Group, S Alam Group, NASSA Group and Orion Group, as having benefited the most from politically influenced lending practices. Their loans are now becoming defaulted.
Besides, many businesspeople with strong ties to the ousted government have either ceased operations or gone into hiding, leading to further repayment defaults.
