Defaulted Loans Escalate Widely Across Bangladesh Banking Tier

Despite a sequence of loose regulatory frameworks and policy concessions intended to suppress the visible volume of bad debt, non-performing loans (NPLs) registered sharp increases across 44 of the country’s 61 scheduled banks during the January–March quarter. Senior inspectors from the central bank, Bangladesh Bank, reported that the breadth of this fiscal deterioration across so many lenders is entirely unprecedented for the domestic financial market.

The upward trajectory of toxic debt was notably not restricted to historically weak or undercapitalised institutions. Several of the market’s most stable and heavily capitalised private commercial entities—including City Bank, Prime Bank, Bank Asia, Uttara Bank, and the multinational Standard Chartered Bank Bangladesh—simultaneously registered significant expansions in their defaulted asset portfolios.

Macroeconomic Aggregates and Recovery Strain

During the three-month window, the collective volume of non-performing liabilities across the 44 affected banking institutions expanded by an aggregate sum of Tk31,487 crore. System-wide data indicates that the total volume of defaulted loans reached a milestone of Tk5.88 lakh crore by the conclusion of March. This aggregate represents 32.26% of all outstanding credit lines in the country, up from Tk5.57 lakh crore (30.60%) documented at the close of December.

Central bank administrators clarified that this volumetric spike was partly driven by stricter post-quarter audits, which unmasked concealed defaults that had been left understated in the December disclosures. Furthermore, widespread macroeconomic pressures have heavily impaired corporate cash flows, reducing overall loan recovery rates.

Segmented Performance and Portfolio Allocations

The contraction in credit quality has deeply affected public, private, and foreign commercial operations alike. The structural data below details the institutional variations across the banking grid:

Public Sector and Agricultural Lenders

Total NPLs across the six state-owned commercial banks grew by Tk3,677 crore to touch an aggregate total of Tk1,49,785 crore, meaning that bad loans comprise 45.85% of their combined advances. Four public banks suffered explicit deteriorations, led by Janata Bank, which saw its NPLs escalate by Tk2,258 crore to Tk75,000 crore—amounting to approximately 74% of its entire outstanding credit book.

Specialised agricultural and development institutions similarly reported negative portfolio adjustments: Bangladesh Krishi Bank registered a bad loan increase of Tk396 crore, Rajshahi Krishi Unnayan Bank grew by Tk199 crore, and Probashi Kallyan Bank reported a rise of Tk34 crore.

Private Commercial Banks Portfolio Tracking

The private banking segment experienced the largest volumetric shift in defaulted debt over the quarter. Aggregate NPLs across 43 private commercial operations rose by Tk26,903 crore to reach Tk4,16,000 crore, accounting for 30.11% of their collective outstanding advances. Thirty-four individual private institutions suffered positive shifts in toxic debt.

Industry Rationalisation and Macro Challenges

Key executive operators inside the banking network have pointed toward systemic economic shifts and strict reclassification policies as the primary reasons behind this loan performance drop.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, noted that domestic industrial stagnation has limited business expansion plans and undermined corporate repayment capacity. He emphasized that several large-scale commercial borrowers are increasingly leaning on temporary central bank policy instruments to keep their credit standings from slipping.

Elaborating further, Md Touhidul Alam Khan, managing director and chief executive officer of NRBC Bank, mapped out five underlying structural forces generating this momentum:

“Stricter centralized oversight is forcing previously unrecorded or concealed defaulted loans out into the open, while the termination of long-standing repayment moratoriums and deferred windows has legally forced banks to reclassify non-performing accounts.

At the same time, high domestic inflation, rising capital borrowing costs, and structural bottlenecks in international import-export trades have heavily squeezed corporate cash liquidities. These external pressures are compounded internally by governance vulnerabilities in credit risk assessments, over-valued collateral appraisals, and political interference in loan allocations, which collectively bolster a culture of wilful default among elite debtors.”

— Md Touhidul Alam Khan, Managing Director and CEO of NRBC Bank