Banking Sector Needs 5–10 Years to Recover from NPL Crisis: BB Governor

The banking sector in Bangladesh will require at least five to ten years to recover from the mounting crisis of non-performing loans (NPLs), said Bangladesh Bank Governor Ahsan H. Mansur today.

Speaking at an economic conference held at the Pan Pacific Sonargaon in Dhaka, he highlighted that the true scale of bad loans has only recently come into focus, due to the implementation of stricter loan classification rules.

Mansur pointed out that although official figures have long indicated that NPLs hovered around 8%, independent assessments have revealed a far more worrying situation.

"Two years ago, I estimated that the NPL ratio in the banking sector would be around 25%. However, the latest figures show that it has already reached 35%, and it could be slightly higher," he said at the event organised by Bonik Barta, a leading national Bangla daily.

He stressed that a default rate exceeding one-third of total loans presents a significant challenge for the banking system.

"This means that banks are essentially operating with only two-thirds of their asset quality intact. This is not a small issue—it's a structural risk that will continue to place pressure on the sector," he added.

Mansur cautioned that resolving the NPL crisis would not be quick. "We believe the NPL situation will stabilise at this level. After that, it may gradually start to decline. However, a full recovery will require five to ten years of consistent reform and discipline," he said.

He also noted that the burden of high NPLs will continue to limit lending capacity, reduce investment flows, and undermine overall financial stability unless governance in the sector improves significantly.

Turning to the external sector, Mansur expressed cautious optimism about the increased opening of letters of credit (LCs) for the import of essential goods ahead of Ramadan. "Last year's Ramadan was the most difficult period for managing foreign exchange liquidity. But this year, we are not seeing signs of stress," he said.

He added that all import LCs for Ramadan essentials had already been opened, and LCs for a wide range of other products had seen a significant rise compared to the same period last year. "Imports have grown, showing double-digit growth this month, yet there is no pressure on the exchange rate at this time," Mansur concluded.

The conference also featured speeches by AK Azad, Managing Director of Ha-Meem Group, and AK Enamul Haque, Director General of the Bangladesh Institute of Development Studies (BIDS).