Bangladesh’s banking sector reeling from Tk644 trillion bad loans

Bangladesh’s banking sector is currently reeling from Tk6.44 trillion Non-performing loans (NPLs), representing roughly 35.7 percent of total outstanding loans by late 2025, according to a report by Centre for Policy Dialogue (CPD).

High NPL levels undermine banks’ lending capacity, financial stability, and public confidence.

“Non-performing loans (NPLs) in Bangladesh's banking sector are a major structural concern, with defaulted loans skyrocketing to over BDTk6.44 trillion, representing roughly 35.7 percent of total outstanding loans by late 2025. This crisis, driven by years of poor governance and weak oversight, severely restricts credit flow, limits economic recovery, and causes substantial capital shortfalls across many banks,” CPD said in a recent report.

NPLs have seen a massive rise, with recent reports indicating a nearly tripled volume to over BDTk3.45 trillion in just two years as of early 2025. By September 2025, it reached 35.7 percent of total loans.

The high NPLs are attributed to poor corporate governance, political influence in loan approval, weak regulatory enforcement by Bangladesh Bank, and repeated loan rescheduling. The high volume of bad loans creates capital shortfalls, increases borrowing costs, reduces lending capacity, and hampers overall economic growth.

Fahmida Khatun, Executive Director of Centre for Policy Dialogue, said, “The banking sector continues to slow economic recovery by limiting the effectiveness of monetary policy and restricting credit flows.

“Years of poor governance, weak oversight and repeated loan rescheduling have led to a substantial accumulation of classified (non-performing) loans. The interim government and the Bangladesh Bank have initiated several banking sector reforms, but their effectiveness depends on the commitment of the newly elected government.”