The volume of non-performing loans (NPLs) in Bangladesh has declined by nearly 3 percentage points over the past nine months.
The NPL ratio fell from 35.73% in September 2025 to 32.78% in June 2026.
According to Bangladesh Bank data, the NPL ratio dropped by 2.95 percentage points during this nine-month period.
However, the total volume of default loans remains high. By the end of June, classified loans stood at Tk606,555 crore, accounting for 32.78% of total outstanding loans in the banking sector.
Banking sector experts noted that this improvement in the NPL ratio came amid an ongoing effort to clean up bank balance sheets by identifying long-standing irregularities and hidden default loans.
Consequently, while the NPL ratio offers slight relief, it also provides a clearer picture of the banking sector's actual health compared to the past.
Arief Hossain Khan, executive director and spokesperson of Bangladesh Bank, stated that after August 5, 2024, the central bank prioritized revealing the actual state of the banking sector.
As a result, the true status of many loans that were previously concealed or hidden through rescheduling came to light.
He added that several initiatives have been taken to reduce NPLs, including a one-time exit policy and loan rescheduling facilities for up to 15 years.
Once the full benefits of these measures are realized, the NPL ratio is expected to decline further.
Data from Bangladesh Bank shows that at the end of September 2025, classified loans totaled Tk604,515 crore, which was 35.73% of total loans.
Although classified loans increased slightly to Tk606,555 crore in June this year, the ratio relative to total outstanding loans decreased.
Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said that NPL statistics published during the Awami League government failed to reflect the true state of the banking sector.
While default loans stood at around Tk22,000 crore in 2008, official figures reached nearly Tk200,000 crore by 2024.
However, a white paper revealed that actual default and stressed loans stood at nearly Tk650,000 crore.
Welcoming the central bank’s reform initiatives, he emphasized that there is no alternative to these reforms to overcome the banking sector crisis and restore investment. Simultaneously, focus must be placed on mobilizing domestic resources and reducing default loans.
Experts caution that while the current declining trend in default loans is encouraging, it should not be viewed as a final victory just yet.
The initial process of identifying true default loans may temporarily drive the ratio up. However, ensuring transparency in financial statements and disclosing the real picture remains the primary prerequisite for sustainable reform.
The central bank has also strengthened the reform framework for troubled banks.
Experts believe that adopting expected credit loss (ECL) accounting under IFRS-9 will enhance early identification of potential credit risks.
They argue that focus should not only be on lowering the disclosed NPL figures, but also on eliminating their structural causes.
Strengthening loan recovery, establishing good governance, conducting rigorous credit appraisals, and taking effective legal action against willful defaulters are crucial.
Prof Mustafizur Rahman added that the current government inherited a banking sector burdened with massive default loans and weak public trust.
Therefore, recovering defaulted and laundered funds, enforcing laws effectively, and ensuring bank operations free from political influence are imperative.
Experts conclude that the drop in NPLs over the past nine months is a positive early sign for banking sector reform.
However, December 2026 data will be critical in determining the sustainability of this progress.
Sustained reforms, active loan recovery, and sound governance will further reduce default loans while restoring depositor confidence and financial discipline.