Bangladesh Bank Depositors Stare Into the Abyss

Islami Bank, EXIM Bank depositors face withdrawal troubles as Tk5.88 lakh crore bad loans and Tk1.55 lakh crore capital deficit expose banking system’s deepest crisisWhen Adiba Sultana, a depositor of Islami Bank Bangladesh, went to withdraw the money she expected to receive from her account, she could not get the amount she needed. Abidur Rahman Biswas, a depositor of EXIM Bank, faced a similar ordeal when he sought to withdraw his own money.

For both, the experience exposed a fear that is spreading quietly through Bangladesh's banking system: what happens when a bank cannot return a depositor's money on demand?
For millions of Bangladeshis whose savings are held in banks, this is no longer an abstract question buried in balance sheets and regulatory reports. It is becoming a question of everyday financial security.

Last week on Thursday depositors of Sammilito Islami Bank took to the streets in Chattogram. Hundreds of depositors gathered outside the Bangladesh Bank Chattogram regional office around noon under the banner of the Sammilito Five Islamic Banks Depositors Association, pressing the authorities to end the uncertainty surrounding their hard-earned money.

Behind the queues, withdrawal restrictions and growing anxiety lies a banking sector under extraordinary pressure. Defaulted loans have surged to Tk5.88 lakh crore, while 24 of the country's 61 scheduled banks face a combined capital shortfall of about Tk1.55 lakh crore. The capital deficit has risen by roughly Tk45,000 crore in only three months.

The numbers are staggering. But for depositors such as Sultana and Biswas, the crisis has a much simpler meaning:
They put their money in a bank expecting it to be available when they needed it.When that expectation is shaken, confidence �" the invisible foundation of banking �" begins to crack.

The experiences of Adiba Sultana and Andur Rahman Biswas should be presented as individual depositor accounts and independently verified by the newspaper before publication.

The danger becomes clearer when the banking sector's balance sheets are examined.

Bangladesh Bank data show that the non-performing loan ratio of full-fledged Islamic banks soared to 58.4% in March 2026, almost twice the 29.2% recorded a year earlier. The nine fourth-generation banks licensed in 2013 saw their NPL ratio rise to 52.2% from 44.4%.

These figures mean that more than half of the reported loan portfolios in these categories were classified as distressed.

Even more alarming is their funding structure. The advances-to-deposit ratio of full-fledged Islamic banks reached 120.3%, while that of fourth-generation banks stood at 101.6%.

A bank lending more than the deposits it holds must depend increasingly on other sources of funding. When confidence weakens and depositors demand cash, that dependence can become a serious liquidity vulnerability.

This is where the crisis moves from the balance sheet to the bank counter.

A bank may possess billions of taka in loans and other assets, but if a large portion of those loans is not producing cash, the institution can face difficulty meeting immediate withdrawal demands.
Liquidity keeps a bank open. Capital keeps it alive. Confidence keeps it functioning.

All three are now under pressure.

The crisis is particularly visible at Islami Bank Bangladesh, one of the country's largest private banks. Its classified loans reached Tk95,629 crore in March 2026, more than doubling from Tk47,618 crore a year earlier.

The bank has faced acute liquidity pressure and required central-bank assistance amid deposit withdrawals. Its deterioration illustrates how years of weak credit discipline can eventually reach the customer at the counter.

For depositors, the distinction between insolvency and illiquidity offers little comfort.

If a customer cannot withdraw the money required to pay a medical bill, tuition fee, business supplier or family expense, the technical classification of the problem becomes secondary.

The money is theirs. The bank is supposed to return it.

The wider banking system tells an even more troubling story.

Of the 24 banks facing capital deficits, four are state-owned commercial banks, two are specialised banks and 18 are private lenders. Major reported deficits include Tk12,768 crore at Janata Bank, Tk5,975 crore at UCB, Tk5,821 crore at Agrani Bank and Tk4,470 crore at Rupali Bank.

The immediate question is not simply how these institutions accumulated such large deficits.

It is who will ultimately bear the losses.

For years, influential borrowers were able to secure enormous credit exposures amid allegations of weak due diligence, inadequate collateral, connected lending and political influence. Repeated rescheduling allowed distressed loans to remain hidden or delayed their recognition as bad debts.

That created a destructive cycle:
borrow → default → reschedule → borrow again → default again.

The losses did not disappear.They accumulated silently inside the banking system until the balance sheets could no longer conceal them.

The central bank's stricter asset-quality assessments have begun exposing the scale of the damage. The sector's non-performing loans (NPL) ratio reached a record 35.73% in September 2025, before easing to 32.26% in March 2026.

The improvement in the headline ratio should not be mistaken for a return to health.

A fall in reported NPLs does not necessarily mean that borrowers have suddenly become financially stronger. The quality of rescheduled loans, provisioning levels, recoverability of collateral and the true economic value of distressed assets remain critical.

And behind some of the largest loans lies another unresolved question: how much money has left Bangladesh?
Allegations of illicit offshore transfers and money laundering involving major borrowers require rigorous investigation and evidence-based legal action. Where bank funds have been illegally diverted abroad, tracing and recovering those assets should become a central element of the banking-sector clean-up.

The new Bank Resolution Act has given Bangladesh Bank considerably stronger powers to confront failing institutions.

The regulator can now intervene in distressed banks, replace management, restructure institutions, transfer assets and liabilities and, where necessary, move towards orderly resolution.

Bangladesh Bank has already removed boards and appointed administrators in troubled institutions and has initiated liquidation proceedings against nine non-bank financial institutions.

The significance of these actions extends far beyond the institutions directly affected.

They represent a break from a culture in which weak financial institutions could be kept alive indefinitely through repeated liquidity support, restructuring and regulatory concessions.

But the central bank now faces an extremely delicate balancing act.

It must prevent failing banks from dragging down the wider system without creating panic among depositors of otherwise viable institutions.Because banking crises are ultimately confidence crises.

A rumour can trigger a withdrawal.A withdrawal can create a liquidity shortage.A liquidity shortage can force emergency borrowing.And emergency borrowing, if repeated without fundamental restructuring, can merely postpone insolvency.

The new deposit-protection framework provides coverage of up to Tk2 lakh per depositor. But that is a limited safety net for households and businesses with substantially larger balances.

For a depositor holding Tk10 lakh, for example, the statutory insurance ceiling would cover only Tk2 lakh, subject to the law's applicable rules.

That reality makes the credibility of bank resolution even more important.

Depositors must know that if a bank fails, their essential banking services and protected deposits will be handled through an orderly process �" rather than being left waiting indefinitely for access to their savings.

Bangladesh cannot solve the crisis simply by injecting more money into troubled banks.Recapitalisation without reform would only socialise the losses while leaving the causes intact.

The country needs aggressive loan recovery, transparent recognition of losses, credible prosecution where fraud is established and a fundamental overhaul of bank ownership and governance.

The largest defaulting borrowers must be pursued with the same determination regardless of their political or corporate connections. Where assets have been illegally transferred overseas, international cooperation must be mobilised to trace and recover them.

At the same time, genuine businesses facing temporary distress should have access to transparent and commercially viable restructuring.The banking sector must also be freed from excessive influence by business groups and political interests.

A bank is not an ordinary company.It operates primarily with other people's money.Its directors therefore cannot treat its balance sheet as a private treasury, and its shareholders cannot expect the state to absorb losses arising from reckless lending.

The figures now confronting Bangladesh are too large to be dismissed as isolated institutional failures:Tk5.88 lakh crore in defaulted loans,  Tk1.55 lakh crore in capital shortfalls, 24 banks below required capital levels, 58.4% NPLs among full-fledged Islamic banks,  52.2% among fourth-generation banks and Tk95,629 crore in classified loans at Islami Bank Bangladesh.

But the most important figure may not appear in any Bangladesh Bank report.It is the number of depositors who are beginning to ask the same question as Adiba Sultana and Abidur Rahman Biswas:
“If I need my money tomorrow, will my bank give it to me?”

That is the question that Bangladesh's banking authorities must answer �" not with another promise of liquidity, but with credible recovery, stronger capital, professional governance and absolute accountability.Because once depositors lose faith in the banking system, the crisis moves beyond bad loans and balance sheets.

It becomes a crisis of trust.And trust, once broken, is the hardest asset for any bank �" or any financial system �" to recover.