Introduction to the Banking Crisis in Bangladesh
The Bangladesh Bank (BB) has set an ambitious target to reduce non-performing loans (NPLs) to 25 percent from the current 36 percent by March. This goal was announced in a meeting held at the BB headquarters, where senior bankers and officials discussed strategies to tackle the growing issue of bad debts in the banking sector.
The Current State of Non-Performing Loans
The volume of defaulted loans in the banking sector has risen to Tk 6.44 lakh crore, which is nearly 36 percent of total loans disbursed, by the end of September 2025. This is the highest level since 2000, exposing vulnerabilities in the banking system and raising concerns about financial governance. In September 2024, the ratio of bad loans stood at 16.93 percent of total outstanding loans, which means that the share of NPLs has roughly doubled within a year.
Strategies to Reduce Non-Performing Loans
To address the issue, banks have been instructed to cut the volume of bad debts through loan rescheduling, accelerating legal recovery, and implementing a comprehensive follow-up process for defaulters. The central bank has also formed a five-member committee to provide policy guidance for restructuring or rescheduling corporate loans affected by circumstances beyond borrowers’ control. Under the central bank’s policy support, around 300 companies, including some of the largest defaulting conglomerates, applied for loan rescheduling or restructuring facilities worth around Tk 2 lakh crore during the first nine months of 2025.
Progress and Challenges
About 44 percent of the approved policy support has been implemented so far, with some banks performing at satisfactory levels. However, the central bank officials expressed dissatisfaction with the banks’ efforts to tackle defaulted loans, despite various initiatives by the government and the central bank. Bankers have expressed optimism that they would be able to reduce bad loans by March, but it remains to be seen whether they can meet the target.
Foreign Exchange Market and Other Issues
The meeting also discussed the foreign exchange market, with banks currently holding adequate foreign currency reserves. The central bank has injected around Tk 40,000 crore in local currency against its purchase of $3.50 billion over recent months. The BB governor asked banks to ensure smooth letter-of-credit payments ahead of Ramadan to maintain the food supply chain. Additionally, the central bank instructed banks to run campaigns for the upcoming referendum at their head offices and branches.
Conclusion
In conclusion, the Bangladesh Bank’s target to reduce non-performing loans to 25 percent by March is an ambitious one, but it is essential to address the growing issue of bad debts in the banking sector. The central bank and commercial banks must work together to implement effective strategies to reduce NPLs and ensure the stability of the financial system. With the right approach and commitment, it is possible to achieve the target and promote a healthier banking sector in Bangladesh.
