Don’t Let Bad Loans Sink Our Banks 

We find the continued rise in classified loans deeply concerning. According to recently released Bangladesh Bank data, such loans reached Tk6,06,555 crore at the end of June 2026, up Tk17,851 crore in just three months. The ratio also rose to 32.78 per cent from 32.26 per cent in March. With total outstanding loans at around Tk18,49,192 crore, nearly one-third of bank lending now faces serious repayment difficulties. This is a clear warning that the banking sector can no longer afford to ignore the scale of the crisis.

The figures also show that the burden is heavily concentrated in a handful of banks. Classified loans stood at Tk5,57,217 crore in December 2025, increasing by Tk49,338 crore in six months. Meanwhile, 15 banks accounted for around 85 per cent of total defaulted loans in March, with their combined non-performing loans approaching Tk5 lakh crore. Such concentration points to serious failures in credit assessment, risk management and loan recovery. It is commendable that the authorities have already taken several steps. Bangladesh Bank introduced an exit facility for eligible defaulters and provided around Tk75,903 crore in emergency liquidity support to troubled banks. Five distressed Islamic banks have also been merged into Sammilito Islami Bank. However, these measures have yet to stem the rise in bad loans.

The consequences will extend far beyond bank balance sheets. Higher provisions for bad loans eat into profits and capital, leaving banks with less capacity to finance productive businesses. That can hold back investment, business expansion and job creation. More worrying still, banks continue to lend without proper scrutiny, while troubled institutions receive repeated support without adequate accountability. This shifts the cost onto responsible lenders and borrowers and, ultimately, the wider economy.

We therefore believe recovery must become a top priority, not an afterthought. Banks should strengthen credit assessment, verify borrowers’ repayment capacity and identify risky accounts early. Bangladesh Bank must tighten supervision and hold directors and senior officials accountable for serious lending failures. Authorities should also expedite loan-recovery cases, trace borrowers’ assets and take firm action against wilful defaulters. Restructuring should not become a means of indefinitely postponing repayment. Any future concession must be tied to a credible repayment plan and strict monitoring.

We expect the government and the central bank to ensure that these measures produce tangible results. Banks should regularly disclose their recovery progress and fresh defaults so that the public can assess whether the situation is improving. Above all, the authorities must restore confidence in the banking sector through greater discipline and transparency. Otherwise, the growing burden of bad loans could eventually sink not only individual banks but public confidence in the financial system itself.