Bangladesh’s banking sector seems to have fallen into a deep abyss of defaults, as the latest quarterly report of Bangladesh Bank shows that the amount of defaulted loans stood at Tk644,515 crore at the end of September this year, the highest in the country’s banking history.
This figure has increased by about Tk360,000 crore in just a year.
According to the latest statistics of the central bank, the total amount of loans in the banking sector stood at Tk1,803,840 crore at the end of September 2025. Of this, NPLs were Tk644,515 crore, which is 35.73% of the total loans.
In June, total loans disbursed was Tk1,768,368 crore, while NPLs were Tk608,345 crore—an increase by more than Tk36,000 crore in just three months.
On the other hand, the amount of bad loans at the same time last year was Tk285,000 crore, which was 16.93% of the total loans.
The latest calculation of Bangladesh Bank as of September 30, 2025 says that defaulted loans and related risks have increased in almost all indicators compared to June.
The situation has also deteriorated rapidly in the previous two quarters, as in March 2025, the loan default rate was 24.13%, in June it was 34.40%, and in September this year, that rate is now 35.73%.
According to Bangladesh Bank officials, the actual defaulted loans have been hidden for a long time. As a result of strict monitoring, new instructions and special audits, the real situation is now being revealed.
Provision deficit increased further
There is a large deficit in the provisions (reserves) that banks have to keep to deal with non-performing loans. Currently, the required provisions: Tk474,598 crore, the reserved provisions: Tk130,366 crore. This brings the provision deficit to Tk344,231 crore, which is Tk24,511 crore more than in June.
The interest that cannot be collected due to defaulted loans is considered deferred interest.
At the end of September, deferred interest stood at Tk98,343 crore, which has increased by Tk5,306 crore in three months.
Net, or actual, non-performing loans, excluding provisions and deferred interest, stood at Tk415,805 crore in September 205. This is an increase of Tk27,438 crore compared to June.
The net NPL rate stood at 26.40%, which was 25.08% three months ago.
Behind the rise
Banking sector officials say that 16 years of weak supervision, political influence, malpractices of unscrupulous businessmen, and irregularities in loan rescheduling have rendered the entire sector ineffective.
Besides, after the fall of the Awami League government in August last year, several large groups suddenly refused to repay loans or resorted to delaying tactics, which accelerated the growth of NPLs.
Bangladesh Bank sources said that not only defaulters—including write-offs, rescheduled, suspended, and court-held loans—but also ‘distressed assets’ may soon exceed Tk1,000,000 crore.
By the end of June 2025, defaults in state-owned banks reached Tk152,755 crore — 44.6% of total loans disbursed.
The picture of private banks is not very good either, as NPLs hit Tk425,660 crore, with an NPL rate of 32.9%.
Bangladesh Bank officials say that the level of irregularities was high due to the administrative weakness of these institutions and the shadow of the previous politically influential group.
The picture in foreign banks was the start contrast, with the default rate only 6.1%, and total default amount Tk2,952 crore
Analysts’ warning
Former director general of Bangladesh Institute of Bank Management (BIBM) Toufic Ahmad Choudhury said: “Now about 35% of loans in the country are non-performing. This will be a serious blow in the long run. Banks’ income will decrease, and provisions will increase, resulting in a decrease in the capital base. Foreign investors will be hesitant, and international banks will increase transaction costs.”
“The biggest problem is the lack of exemplary punishment. It is impossible to get out of this situation without strict action against loan defaulters.”
The June quarter data is usually prepared by the Bangladesh Bank’s Banking Regulation and Policy Department (BRPD). However, this time they did not publish the data.
Instead, the Statistics Department collected data directly from the banks and published the report.
As a result, there may be discrepancies between the data of the two departments, which is creating confusion in policy formulation regarding the banking sector.
Islami Bank MD and CEO Md. Omar Faruk Khan said: “We are in talks with international law firms to recover foreign assets. The main goal is to reduce real losses and increase cash recovery.”
He hopes that it may be possible to reduce the default rate of their banks from 50% to 35% within next year.
However, he also admitted that debt recovery has become difficult as business activity has slowed down ahead of the national elections in February next year.
In 1999, the default rate in the banking sector was a record 41.1%. Then, as a result of a series of reforms, it came down to 6.1% in 2011.
But in the last 13 years, the old crisis has returned—in a more widespread and deeper form.
Experts say that if strict measures are not taken now, the lack of confidence in the banking sector will create widespread uncertainty among depositors and investors, and even future economic growth will be at great risk.
