Bangladesh’s Financial Institutions Division under the Ministry of Finance has issued a stringent set of directives to six state-owned commercial banks to tackle the staggering volume of non-performing loans (NPLs) eroding the nation’s banking sector. The six institutions currently account for approximately a quarter of the country’s total default loans, holding an aggregate bad debt burden of around Tk 1,48,000 crore.
During a recent meeting with the chief executives of the banks, the Secretary of the Financial Institutions Division laid out a targeted turnaround strategy. The government instructed the lenders to accelerate cash recoveries, rigorously scrutinise credit quality, raise customer deposits, and rebuild their capital adequacy ratios. To enforce systematic recovery, each bank must compile a detailed list of its top 20 loan defaulters and execute a binding 12 to 24-month operational plan.
A breakdown of default loans across the six state-owned lenders highlights the uneven distribution and scale of the crisis:
-
Janata Bank: Tk 75,396 crore
-
Agrani Bank: Tk 29,029 crore
-
Rupali Bank: Tk 19,281 crore
-
Sonali Bank: Tk 15,048 crore
-
BASIC Bank: Tk 8,131 crore
-
Bangladesh Development Bank (BDBL): Tk 889 crore
Severe default levels have forced several of these institutions to face huge provisioning shortfalls and capital deficits. While the government indicated a willingness to provide recapitalisation support if required, assistance remains strictly contingent on the banks improving recovery performance, closing capital gaps, and returning to profitability.
Industry analysts remain cautious about whether the government can enforce true accountability, ensure internal governance, and take decisive legal action against major defaulters. Dr Toufic Ahmad Choudhury, former Director General of the Bangladesh Institute of Bank Management (BIBM), pointed to a lack of political commitment as the primary obstacle to reform. He observed that if the government possesses genuine political resolve to rescue and turn around the collapsing state banks, significant recovery could be achieved within six to twelve months. Without strong political will, structural recovery will remain elusive.
Dr Choudhury also highlighted the immense challenges surrounding actual cash collection. Direct cash recovery remains the most effective solution, yet defaulters frequently exploit legal loopholes to block asset sales. When banks attempt to liquidate pledged collateral, borrowers routinely initiate complex litigation, securing court stay orders that prevent lenders from officially classifying or recovering defaulted debts.
