Bangladesh’s non-performing loan (NPL) ratio fell by nearly three percentage points over the nine months to June 2026, amid banking-sector reforms and intensified efforts to recover overdue loans.
According to Bangladesh Bank data, the NPL ratio declined from 35.73% in September 2025 to 32.78% in June 2026—a drop of 2.95 percentage points.
Despite the decline in the ratio, the overall volume of classified loans remains high. At the end of June, classified loans stood at Tk 606,555 crore, equivalent to 32.78% of total loans in the banking sector.
Banking-sector experts say the improvement in the NPL ratio has come amid efforts to identify previously concealed bad loans and clean up banks’ balance sheets. While the process has provided some relief in terms of the NPL ratio, it has also brought the actual condition of the banking sector into clearer view.
Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan said the central bank had focused on presenting a more accurate picture of the banking sector after August 5, 2024. As a result, the actual status of many loans that had previously remained concealed or been kept outside the classified category through rescheduling became visible.
He said various measures had been introduced to reduce bad loans, including a one-time exit policy and loan rescheduling for up to 15 years. He expressed hope that the NPL ratio would decline further as the benefits of these measures become fully reflected.
Bangladesh Bank data show that classified loans stood at Tk 604,515 crore at the end of September 2025, accounting for 35.73% of total loans. By June this year, the amount had increased slightly to Tk 606,555 crore, but its share of total loans had declined.
Distinguished Fellow of the Centre for Policy Dialogue (CPD) Professor Dr Mostafizur Rahman said the bad-loan figures published during the Awami League government did not fully reflect the banking sector’s actual condition.
He noted that classified loans, officially reported at around Tk 22,000 crore in 2008, had risen to nearly Tk 2 lakh crore in 2024. However, a white paper estimated the actual volume of bad and distressed loans at around Tk 6.5 lakh crore.
Welcoming Bangladesh Bank’s reform initiatives, Mostafizur said such reforms were necessary to overcome the banking sector’s problems and restore investment. He also stressed the need to increase domestic resource mobilisation and reduce bad loans.
Experts caution, however, that the recent decline in the NPL ratio should not yet be regarded as a final measure of success. The ratio could initially rise as previously unrecognised bad loans are identified. They say transparency in banks’ accounts and disclosure of their actual financial position are fundamental to sustainable reform.
Abdul Qayyum Chowdhury, additional managing director of South Bangla Agriculture and Commerce Bank, said the process of cleaning up banks’ accounts could create some short-term pressure, but would help build a stronger and more stable banking system in the long run.
He stressed the importance of professional management, proper loan assessment and effective recovery mechanisms.
The central bank has also strengthened its reform framework for troubled banks. Experts expect the introduction of expected credit loss (ECL) accounting under the International Financial Reporting Standard, IFRS 9, to improve the early identification of potential credit risks.
According to experts, attention should now focus not only on reducing reported NPLs but also on addressing the structural causes behind bad loans. Stronger recovery efforts, improved governance, stricter loan assessments and effective legal action against willful defaulters are needed.
Mostafizur Rahman said the current government inherited a banking system burdened by large volumes of bad loans and weak confidence. He called for recovery of bad and allegedly siphoned-off funds, effective enforcement of the law and banking operations free from political influence.
Experts said the decline in the NPL ratio over the past nine months represents an initial indication of progress in banking-sector reform. However, data through December 2026 will be important in assessing whether the improvement is sustainable. Continued reforms, stronger loan recovery and better governance will be key to further reducing bad loans and restoring depositor confidence and credit discipline in the banking sector.
