Here’s a shocking truth: Bangladesh’s banking sector just saw a dramatic drop in non-performing loans (NPLs) to 30.6% in the fourth quarter of 2025, but this victory might be more fragile than it seems. And this is the part most people miss—while aggressive debt rescheduling under relaxed central bank policies slashed NPLs by a staggering Tk87,298 crore, the sector still faces a Tk1.91 lakh crore provision shortfall, leaving depositors at risk. But how did we get here, and is this improvement sustainable? Let’s dive in.
By the end of December 2025, NPLs stood at Tk5.57 lakh crore, down from Tk6.44 lakh crore in September, thanks largely to a massive rescheduling campaign. But here’s where it gets controversial—banks only set aside Tk2.49 lakh crore in provisions for defaulted loans, a gap analysts warn could spell trouble. Mohammad Ali, managing director of Pubali Bank, explained that regulatory support from the central bank allowed borrowers to reschedule classified loans, shifting them out of the default category. Yet, this raises the question: Is this a genuine recovery or just a temporary fix?
The roots of this crisis run deep. After the political transition following the fall of the Sheikh Hasina-led government, hidden defaulted loans began to surface. In September 2024, defaulted loans were Tk2.11 lakh crore, but reassessments uncovered an additional Tk4.33 lakh crore in bad loans accumulated over the years. By September 2025, defaulted loans peaked at Tk6.44 lakh crore, driven by irregularities, fraud, and corruption involving major business groups like S Alam Group and Beximco Group. What’s your take? Is the banking sector’s decline a result of systemic failures or isolated incidents?
Stricter supervision, including audits by foreign firms, forced banks—particularly Islamic banks—to reveal the true extent of their bad loans. Since April 2025, loans have been classified as defaulted after three months of non-payment, aligning with international standards. Yet, bankers blame the deterioration on widespread corruption and scandals that weakened both Islamic and conventional banks over the past decade and a half.
Breaking it down by sector, state-owned commercial banks saw defaulted loans drop to Tk1.46 lakh crore by December 2025, while private commercial banks recorded a sharper decline to Tk3.89 lakh crore. Specialised banks also saw modest reductions. But here’s the kicker—this improvement was fueled by a policy introduced in September 2024, allowing borrowers to reschedule loans for up to 10 years with just a 2% down payment. Nearly 1,300 companies have regularised their loans under this scheme, and the Bangladesh Bank recently relaxed terms further, allowing rescheduling with a 1% down payment.
Syed Mahbubur Rahman of Mutual Trust Bank praised the policy support, noting that some banks reduced defaulted loans from 10% to 5%. However, a private bank managing director warned this could be temporary, as rescheduled loans may generate limited recovery and revert to non-performing by 2027. So, what do you think? Is this a step toward stability or just delaying the inevitable? Let us know in the comments!
