Bangladesh’s banking sector has entered a critical stage as classified loans have ballooned to Tk4,20,334.94 crore by the end of March 2025. This figure now represents 24.13 percent of all disbursed loans, reflecting a sharp deterioration in credit health and exposing systemic risks to the country's financial system, reports UNB.
According to Bangladesh Bank’s latest data, the volume of bad loans has jumped by Tk74,570 crore in just three months—from Tk3,45,764.86 crore in December 2024. In comparison to March 2024, when the classified loan ratio was 11.11 percent, the rise over a single year is even more alarming at over 13 percentage points.
Equally concerning is the surge in defaulted loans, which alone amounted to Tk3,57,655.24 crore as of March 2025. These loans now make up 20.53 percent of total outstanding credit and have increased by more than Tk52,500 crore since the previous quarter. This indicates a growing inability among borrowers to meet repayment obligations, further straining the sector’s already fragile stability.
The situation is compounded by a severe provision shortfall. Banks are expected to maintain reserves to absorb potential losses from non-performing loans, but the gap between required and actual provisions has widened significantly. The provision shortfall has climbed to Tk1,70,655.32 crore in March 2025 from Tk1,06,130.82 crore in December 2024. As a result, the provision coverage ratio has fallen to just 37.97 percent from 50.75 percent, highlighting the banks’ diminishing capacity to shield themselves from credit defaults.
State-owned commercial banks are bearing the heaviest brunt, with 45.79 percent of their loans now classified as problematic—up from 42.83 percent in the previous quarter. Private commercial banks have not been spared either, seeing their classified loan rate rise to 20.16 percent from 15.60 percent. Even foreign and specialized banks, traditionally more stable, experienced increases, with their rates standing at 4.83 percent and 14.47 percent, respectively.
The central bank has identified several contributing factors behind this rapid rise in distressed loans. The redefinition of loan maturity terms under BRPD Circular No. 09/2024 has led to stricter classifications. Bangladesh Bank’s inspection department has also aggressively flagged large exposures as adverse. Furthermore, a significant number of current loans are not being renewed, while many borrowers who previously had their loans rescheduled have failed to meet their installment deadlines. In many cases, interest continues to accrue even on already classified loans, compounding the total amount and deepening the crisis.
The alarming figures paint a sobering picture of the challenges facing Bangladesh’s financial sector. Without urgent and robust policy measures, the rising tide of classified loans threatens to undermine banking stability, curtail credit flow, and derail the broader economic recovery.
Bd-pratidin English/ Jisan
