Bangladesh's banking system is heading into one of its most challenging periods yet, as political uncertainty, stagnating investment, high inflation, and rising non-performing loans (NPLs) put immense pressure on financial institutions ahead of the national elections scheduled for February 12. Analysts warn that without decisive policy measures and restored confidence, the sector could face an unprecedented crisis.
Banking stakeholders say depositors' trust has eroded over recent years due to liquidity crises, mismanagement, irregularities, and political influence. While some banks have lured deposits with high interest rates, inefficient investment of those funds is creating additional strain. Citizens are increasingly breaking existing savings to meet daily needs, hampering sustainable economic recovery. Non-performing loans have emerged as the deepest threat. According to Bangladesh Bank, by September 2025, NPLs had more than doubled from a year earlier, reaching Tk 6,44,515 crore, or 36 per cent of total loans. In contrast, NPLs in September 2024 stood at Tk 2,84,977 crore (16.93per cent) of total loans, which were Tk 18,03,840 crore.
The distribution of NPLs across banks is highly uneven. Of the 61 banks in the country: 23 banks had NPLs below 10 per cent; 13 banks had NPLs between 10-20 per cent; 8 banks had 20-50 per cent; 17 banks had NPLs exceeding 50 per cent, including six banks with over 90 per cent of loans non-performing
The most critical cases of NPL include: National Bank of Pakistan - 99.84 per cent; Union Bank - 96.64 per cent; First Security Islami Bank - 96.20 per cent; Global Islami Bank - 95.70 per cent; Padma Bank - 94.17 per cent; ICB Islami Bank - 91.38 per cent.
Experts warn that banks with NPLs exceeding 50 per cewnt pose a systemic risk, threatening the stability of the entire banking sector.
Deposits, meanwhile, continue to rise. From June to September 2025, total deposits increased by Tk 34,536 crore, reaching Tk 20,31,119 crore. Yet, credit growth remains sluggish. Private sector credit growth fell to 6.23 per cent in October 2025, down from 6.29 per cent in September, and well below 8.30 per cent a year ago.
This growing gap between deposits and investment is a cause for concern. Bangladesh Bank Executive Director Arif Hossain Khan explained that while banks earn by investing deposits and paying interest to customers, idle funds increase financial pressure and risks. "Focusing solely on collecting deposits without proper investment can lead to losses," he said.
Analysts say 2026 will be a testing year for the banking sector. With strong policy measures and political commitment, confidence could return. Without them, mounting defaulted loans and economic uncertainty could deepen the crisis, threatening the financial system’s stability.
