Rupali Bank Under Pressure From Loan Surge

The volume of forced loans at Rupali Bank reached $1.87 billion by the end of December 2025, nearly doubling within four years, according to an inspection by the Bangladesh Bank. The increase highlights growing pressure on the bank’s financial stability and operational controls.

Central bank data indicates that forced loans rose by 91.59% from $976 million in 2021. The upward trend continued with the figure standing at $1.23 billion in 2023 and $1.49 billion in 2024, before reaching the latest level in 2025.

Forced Loan Growth Overview

In standard banking operations, forced loans arise when importers fail to settle liabilities under letters of credit (LCs) within the agreed timeframe. In such cases, the bank pays the overseas supplier and subsequently records the unpaid amount as a loan in the importer’s name. Officials note that the continued rise reflects repeated defaults in settling LC obligations, which adversely affects liquidity and asset quality.

Economists regard the expansion of forced loans as a key indicator of financial stress, as it suggests borrowers are unable to meet repayment commitments. Dr Md Ezazul Islam, Director General of the Bangladesh Institute of Bank Management, stated that such a trend points to underlying financial fragility. He observed that when forced loans approach $2 billion, it indicates that the bank has already settled large sums with foreign institutions without corresponding recovery from clients. He also emphasised the need for stricter oversight to prevent irregular practices.

A senior official at Rupali Bank stated that a substantial portion of the forced loans is linked to the garment sector, where import payments tied to production inputs were not settled on time.

The inspection also identified weaknesses in foreign exchange operations. The bank reportedly paid $2.20 billion to foreign entities for import transactions but could not provide bills of entry confirming that the goods had entered Bangladesh. A considerable number of such documents remain outstanding, raising concerns about compliance and verification.

In March, the central bank rejected the bank’s proposal to open a new authorised dealer branch in Rajarbagh, citing deficiencies in risk management. The decision followed an assessment showing a consistent decline in key foreign trade indicators.

Foreign Exchange Performance Indicators

The Bangladesh Bank noted that all major foreign currency transaction indicators have weakened over the period.

Further findings from inspections at five authorised dealer branches revealed 46 significant irregularities. These included the concealment of liabilities, extension of new credit facilities to defaulting borrowers, and the creation of forced loans without head office approval. The bank was rated “unsatisfactory” in internal control and compliance, credit risk management, and ICT security.

As of 31 December 2024, Rupali Bank’s non-performing loans stood at Tk21,358 crore, accounting for 41.60% of its total loan portfolio, indicating elevated credit risk.

In response, a senior bank official stated that approximately 95% of the outstanding bills of entry are linked to imports by the Bangladesh Petroleum Corporation. Central bank officials acknowledged that discrepancies partly stem from tariff valuation issues and noted that discussions involving the corporation and the National Board of Revenue are ongoing.

The bank also cited exchange rate fluctuations and post-pandemic disruptions, including cancelled export orders in the garment sector, as contributing factors behind delayed payments. It added that improvements in foreign exchange operations could help stabilise its financial position.