AE Desk:

Just 10 of the country’s 61 banks accounted for more than 72% of the banking sector’s total non-performing loans (NPLs), commonly known as defaulted loans, at the end of June.

According to the latest data from the Bangladesh Bank, total NPLs in the banking sector stood at Tk6,06,555 crore at the end of June, equivalent to 32.78% of total defaulted loans. In other words, nearly Tk33 out of every Tk100 lent by banks was classified as non-performing.

NPLs stood at Tk5,88,704 crore at the end of March, meaning defaulted loans increased by around Tk17,851 crore in three months.

The 10 weak banks had around Tk4,39,527 crore in NPLs at the end of June. This means nearly three-quarters of the banking sector’s NPLs were concentrated in just one-sixth of its banks.

The figures show that the banking sector’s crisis has not affected all lenders equally. Rather, a handful of banks have become particularly vulnerable after years of irregularities, weak credit management, lending to influential borrowers, inadequate monitoring of loan utilisation and failures in recovery.

The quality of assets at these banks has deteriorated rapidly, particularly as a portion of large corporate loans has remained unpaid for years. Many loans have eventually become classified as non-performing even after being rescheduled or restructured, suggesting that measures to keep loan classifications apparently under control have failed to resolve the underlying problems.

Asset quality deteriorates sharply

The Bangladesh Bank’s latest assessment also shows a significant deterioration in the quality of bank assets.

According to the central bank’s Financial Stability Report 2025, the NPL ratio in the banking sector rose to 30.60% at the end of December 2025 from 20.20% a year earlier.

The volume of defaulted loans increased further during the first six months of this year, surpassing Tk6 lakh crore by June. The surge is putting additional pressure on banks’ capital, provisioning requirements and profitability.

The Bangladesh Bank has already taken several measures to reduce NPLs, including strengthening loan recovery, tightening supervision of credit management and assessing the quality of banks’ assets.

It is also identifying weak banks and taking steps towards their reform, merger and restructuring.

The World Bank has also identified weaknesses in Bangladesh’s banking sector as a major economic risk. In a report published in June, the multilateral lender said weak corporate governance, regulatory weaknesses and related-party lending had placed significant pressure on the banking sector.

The World Bank said the NPL ratio in Bangladesh’s banking sector stood at 32.6% at the end of March 2026, compared with a South Asian average of 7.9%.

The banking sector represents around 90% of the assets of Bangladesh’s overall financial sector, according to the World Bank. As a result, weakness in banks’ financial positions affects not only depositors and lenders but also investment, business activity, employment and overall economic growth.

10 banks account for most defaulted loans

Private-sector Islami Bank had the highest volume of NPLs at Tk98,914 crore at the end of June, equivalent to 52.15% of its total loans.

A large portion of the bank’s defaulted loans is associated with S Alam Group. The group took control of the bank in 2017, and a large portion of the loans taken by the group had become non-performing by the time the Awami League government fell in 2024.

State-owned Janata Bank had the second-highest volume of NPLs at Tk75,728 crore, representing 75.05% of its total loans.

Beximco Group, associated with former prime minister Sheikh Hasina’s adviser Salman F Rahman, is among the bank’s largest defaulters. S Alam Group and AnonTex are also major defaulters.

The merged banks are in the worst position in terms of their NPL ratios. First Security Islami Bank had the highest ratio at 97.08%, followed by Union Bank at 96.78%, Social Islami Bank at 78.15% and Exim Bank at 70.81%.

Major defaulters at these banks include S Alam Group, Beximco, Nassa Group and Sikder Group, among several other groups.

National Bank had an NPL ratio of 65.74%, while the ratios at IFIC Bank and AB Bank stood at 63.38% and 56.40%, respectively.

State-owned Agrani Bank had an NPL ratio of 43.98%. Its major defaulters include Judge Bhuiyan Group, Zakia Group, Muhib Steel and Ship Recycling, Moon Group and several other companies.

A Bangladesh Bank executive director told The Business Standard that the crisis could not be resolved simply by rescheduling or restructuring loans again.

“The actual condition of long-overdue loans must be determined, action must be taken against those responsible, and effective measures must be taken for speedy recovery,” he said.

The official also stressed the need to assess borrowers’ repayment capacity before extending new loans, monitor the use of loan proceeds and strengthen risk controls for large borrowers.

Otherwise, the executive director warned, the crisis in a handful of banks could gradually create greater pressure across the entire banking system.