Bangladesh’s banking sector is facing mounting pressure as 29 banks report non-performing loans (NPLs) exceeding 10 percent, prompting economists to warn of serious economic consequences.
Under new Bangladesh Bank regulations, banks with classified loans of 10 percent or more are barred from declaring dividends. As a result, nearly half of the country’s scheduled banks, including 17 listed entities, may not be able to pay dividends this year.
According to central bank data, default loans stood at Tk 5.57 lakh crore at the end of December 2025, accounting for 30.60 percent of total outstanding loans. Although the figure declined from a peak of around 36 percent in September due to stricter transparency and recovery measures, it remains alarmingly high.
Economists say the situation reflects deep structural weaknesses. Professor Selim Raihan noted that widespread defaults indicate a “culture of impunity,” where large sums of depositor money remain stuck with a small group of defaulters, limiting investment in productive sectors.
Dr. Fahmida Khatun highlighted the broader economic impact, saying high NPLs are contributing to inflation. Banks are raising lending rates to offset losses, increasing the cost of borrowing for businesses and slowing economic activity.
State-owned banks remain among the worst affected. Janata Bank has the highest volume of default loans at Tk 72,152 crore, representing 74 percent of its total loans. Rupali Bank also shows a high default rate of over 41 percent.
In the private sector, several banks report extremely high default ratios. Union Bank leads with nearly 98 percent, followed by First Security Islamic Bank and Global Islamic Bank, both above 96 percent. National Bank and Islami Bank Bangladesh also have default rates well above the regulatory threshold.
Bankers warn that the high level of NPLs has created a “liquidity trap.” With a large portion of loans not being repaid, banks are struggling to recycle funds. This has forced them to offer higher interest rates to attract deposits, further increasing borrowing costs for key sectors like garments and small businesses.
The crisis is also affecting investor confidence, as the dividend restriction may reduce returns in the capital market.
Despite calls from bank owners to relax certain rules, including employee incentives, Bangladesh Bank has not yet announced any policy changes.
Experts warn that unless strong recovery measures and governance reforms are implemented, the NPL crisis could continue to strain liquidity, drive inflation, and slow economic growth.
