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Published : 16 Jun 2025, 02:42 AM
Bangladesh’s non-performing loans (NPLs) have crossed Tk 4 trillion for the first time in the country’s history, with nearly one in every four loans now in default, according to the latest figures from the central bank.
Data released by Bangladesh Bank shows that as of the March 2025 quarter, NPLs stood at Tk 4.20 trillion, representing 24.13 percent of total outstanding loans.
The previous quarter, ending December, recorded NPLs at Tk 3.45 trillion.
Year-on-year, the increase is staggering: defaults have more than doubled, rising by over 130.57 percent from Tk 1.82 trillion in March 2024.
The total volume of outstanding loans at the end of March 2025 was Tk 17.41 trillion.
Quarterly surges have become routine. In the December 2024 quarter, NPLs jumped by Tk 607.87 billion. The September 2024 quarter had seen a similar increase of around Tk 740 billion over the preceding quarter.
Analysts warn that unless structural reforms and stronger regulatory enforcement are implemented, the problem could further destabilise the banking system and erode public trust.
POLICY SHIFT EXPOSES HIDDEN DEFAULTS
Bangladesh Bank officials attributed the dramatic spike primarily to a recent change in classification policy. The overdue period for loans to be considered defaulted has been reduced from 180 days to 90 days.
Executive Director and central bank spokesperson Arif Hossain Khan confirmed that the change has directly impacted the figures. “The surge is largely due to this revised classification period.”
Shahriar Siddiqui, assistant spokesperson for Bangladesh Bank and a director, shared the data with journalists on Sunday, amid growing concern over the deteriorating health of the banking sector despite reform initiatives undertaken by the interim government.
Experts, including former Bangladesh Institute of Bank Management director general Toufic Ahmad Choudhury, noted that the stricter accounting policy is revealing deeper structural weaknesses that had built up over time.
In fact, Bangladesh Bank Governor Ahsan H Mansur had earlier warned that the reclassification would result in a sharp increase in recorded defaults.
DEFAULTS BY BANKING SECTOR
State-owned banks remain the most troubled. As of March 2025, their NPLs stood at Tk 1.46 trillion, making up 45.79 percent of their total loans. This was up from 42.83 percent in the December quarter. The total outstanding loans for these banks stood at Tk 3.19 trillion.
Private commercial banks fared better, but still recorded a sharp rise. NPLs rose to Tk 2.64 trillion, or 20.16 percent of their loan portfolios, up from 15.60 percent in December. Total lending by private banks amounted to Tk 13.10 trillion.
Foreign banks reported Tk 32.38 billion in defaults--4.83 percent of their total loans--up from 4.13 percent in the previous quarter. Their total lending stood at Tk 670.13 billion.
Specialised banks held Tk 64.94 billion in defaulted loans, accounting for 14.37 percent of their total disbursements of Tk 448.87 billion.
BANGLADESH BANK IDENTIFIES FIVE KEY DRIVERS
In its review of the March quarter, the central bank outlined five main causes behind the surge in NPLs:
Shortened default recognition period for term loans (from 180 days to 90 days).
Adverse reclassification of large client loans following central bank inspections.
Failure to renew active loan accounts by borrowers.
Missed instalments on rescheduled loans.
Interest charges on already adversely classified loans, further burdening borrowers.
