Bangladesh’s banking sector remains in turmoil more than a year after the ouster of a fascist-corrupt government largely owing to the gradual surfacing of undisclosed and disguised sour loans that have pushed up the defaults to record high.
As per the latest available data, defaulted loans have exceeded Tk6,67,000 crore, or 33% of total loans, exposing years of political manipulation and hidden bad debts.
In just one year, defaults have tripled, rising from Tk2,11,000 crore in June 2024 to the current figure. Analysts warn that reckless lending to politically connected groups and misuse of funds have created a liquidity crisis, hurting new investment, jobs, and depositor confidence.
Bangladesh Bank attributes the surge to previously concealed loans, stricter IMF rules, and the end of special exemptions for SME and farm loans. To stabilize the sector, it plans to merge five weak Islamic banks.
Economists say this is a “transition period” as long-suppressed data surfaces. They urge strong recovery measures and legal action against defaulters—long shielded by political influence. Defaults are now equal to a significant share of GDP, threatening financial stability.
Bangladesh Bank’s Executive Director and spokesperson Arif Hossain Khan told Kaler Kantho: “After August 5 last year, many operational factories shut down and their owners disappeared—those loans turned into defaults. Some borrowers had earlier used court privileges to keep defaulted loans listed as regular; that loophole has now been closed. Additionally, IMF loan conditions contributed to the rise in defaults. There is no alternative to recovering these loans—collection efforts must be intensified. The central bank has already prepared support policies for genuinely affected borrowers, which will take effect after June. We hope defaults will begin to fall afterward.”
Dr Shah Md Ahsan Habib, Research Director of the Bangladesh Institute of Bank Management (BIBM), said, “Loan default is the most complex problem in Bangladesh’s banking sector—but for years, corrupt authorities covered it up. To solve a problem, we must first recognize it, and that was never allowed. This government’s positive step is that it’s trying to uncover the truth. That’s why so many hidden defaults are now coming to light.”
“Bangladesh has no history of holding loan defaulters accountable, so people assume bank loans never need to be repaid. But that must change. In Nepal, defaulting borrowers’ names are publicly displayed—on streets and television—to shame them. We should do the same,” he added.
Experts also note that many defaulters from the previous regime have fled abroad, leaving banks in crisis. The central bank and analysts stress the need for strict enforcement, transparency, and restructuring to restore confidence in the banking system.
Bd-pratidin English/TR
