The situation regarding non-performing loans (NPLs) in Bangladesh is taking a dire turn, as out of every Tk100 disbursed by banks, nearly Tk33 is now defaulted.
In terms of the non-performing loan rate, Bangladesh currently ranks highest in the world, surpassing even war-torn Ukraine.
At one point, Ukraine held the world's highest NPL rate. However, by writing off old bad loans, recovering debts, and expanding quality new loans, the country rapidly reduced its rate.
In contrast, as previously concealed irregular and anonymous loans in Bangladesh are now being recognized as defaults, the true picture has emerged.
According to Bangladesh Bank data, by the end of June 2026, non-performing loans in the banking sector rose to Tk606,555 crore.
This accounts for 32.78% of total bank disbursements.
At the end of March 2026, NPLs stood at Tk588,704 crore, meaning defaulted loans jumped by Tk17,851 crore in just three months.
Earlier, in September 2025, NPLs had reached a record Tk644,515 crore.
Industry insiders note that the current surge in bad loans did not happen overnight.
During the previous Awami League administration, many troubled loans were shown as regular through repeated rescheduling, special concessions, and accounting shifts.
Following political changes, asset quality reviews and audits by local and international firms revealed widespread irregularities, fraud, and anonymous loans.
As a result, massive amounts of previously hidden loans are now being classified as non-performing.
The five merged banks are in the worst condition, with over 80% of their disbursed loans turned bad.
Additionally, more than half of the loans in several other public and private banks have defaulted.
Insiders attribute this increase to political influence behind fake and anonymous loans, weak oversight, business slowdowns, and the ongoing energy crisis.
Measures to reduce NPLs
Bangladesh Bank has initiated various steps to curb the high default rate. Loan classification and provisioning rules have been aligned with international standards.
Additionally, asset quality reviews of weak banks are underway, board of directors for several banks have been restructured, and risk-based supervision has been implemented.
Consequently, many troubled loans previously labeled as regular are now being properly identified as defaulted.
To manage the situation, various concessions are being extended to defaulters. However, while loan write-offs or rescheduling may reduce bad debt figures on paper, they do not recover the owed funds.
The International Monetary Fund (IMF) also warned that strict classification policies and asset quality reviews may expose even more non-performing loans.
Experts emphasize that a permanent solution requires seizing the assets of willful defaulters to recover funds, expediting court case resolutions, eliminating political interference in bank management and loan approvals, and preventing new bad loans from forming.
If these measures are consistently enforced, NPLs could decrease in the medium term.
However, resorting to indiscriminate rescheduling and special privileges will only reduce NPL rates on paper without solving the banking sector's core crisis.