Imagine a bank teetering on the edge, weighed down by billions in unpaid loans. That's the reality for Rupali Bank, where a staggering Tk14,156 crore (that's over $1.3 billion USD!) is stuck in non-performing loans (NPLs) from just 32 large borrowers. How did this happen? And what does it mean for the future of this bank and the stability of the Bangladeshi financial system?
The story unfolds with revelations that many of these loans were granted well beyond the limits set by regulators. According to documents reviewed by The Business Standard, these borrowers received special approvals that bypassed standard risk controls.
Here's the crux: Central bank rules define "large borrowers" as those receiving loans exceeding 10% of a bank's regulatory capital. Rupali Bank had 47 such clients. But and this is the part most people miss... just 32 of these borrowers now account for almost 63% of the bank's total loan portfolio! Alarmingly, individual exposures for some of these borrowers exceeded 25% of Rupali Bank's capital – the very ceiling designed to prevent concentrating risk.
Kazi Md Wahidul Islam, Rupali Bank's managing director, points out that most of these problematic loans were approved before his tenure. He assures that recovery efforts are underway, including lawsuits against some borrowers and loan rescheduling for others, based on their ability to repay and existing policy guidelines.
But here's where it gets controversial... When questioned about exceeding the 25% exposure limit, Islam stated that "special circumstances necessitated such approvals in certain cases." What exactly were these 'special circumstances'? This is where the plot thickens.
Banking experts and analysts suggest a troubling combination of factors: a lack of transparency, political influence, and regulatory leniency. They argue that these elements allowed large borrowers to secure excessively large loans from state-owned banks, particularly when the system was under stress and supervision was relaxed. It's like opening the floodgates during a storm!
To understand the gravity of the situation, let's delve into the rules. Bangladesh Bank's policy dictates that a bank's total lending to a single borrower or group cannot exceed 25% of its eligible capital. If this limit is breached, new loans must cease, and a plan to reduce the risk must be implemented. Loans that exceed 10% of regulatory capital are classified as "large," though lending can still reach the 25% threshold.
Data from December 2024 reveals that 18 Rupali Bank clients received loans exceeding capital limits under special approvals, with the top 16 defaulters owing Tk7,660 crore. Arif Hossain Khan, a spokesperson for Bangladesh Bank, emphasizes that these limits exist to prevent excessive concentration of risk and safeguard banks from potential collapse.
Khan also highlights that some borrowers failed to settle non-funded liabilities, such as letters of credit, which were then converted into funded loans, further inflating their exposure. And here's an uncomfortable truth: "Political intervention played a role in large loans, particularly those linked to major conglomerates," he admitted. He cited the S Alam Group (approved to avoid shortages of essential commodities) and Beximco (approved to avoid employment risks and labor unrest) as examples. These examples showcase the difficult decisions policymakers face when balancing economic stability with regulatory compliance.
Rupali Bank, formed in 1972 by merging three banks, was once a profitable institution. Now, it faces immense financial pressure. Among the four state-owned commercial banks, Rupali Bank holds the second-highest default rate, trailing only Janata Bank. By the end of September, default rates stood at 20% at Sonali Bank, 40% at Agrani Bank, 70% at Janata Bank, and a worrying 51% at Rupali Bank.
Despite these rising defaults, Rupali Bank managed to remain profitable last year, alongside Sonali Bank, while Janata and Agrani reported significant losses. Rupali posted a net profit of Tk8 crore, compared to Tk866 crore at Sonali Bank. Janata and Agrani, on the other hand, reported losses of Tk3,071 crore and Tk937 crore, respectively.
Listed on the stock market since 1986, Rupali Bank's net profits were Tk21 crore in 2022 and Tk54 crore in 2023. Central bank figures reveal that Rupali's defaulted loans stood at Tk5,273 crore in 2021 (14.9% of total loans), rising to Tk6,630 crore in 2022 (15.5% of outstanding credit) before sharply accelerating in the last two years.
The situation worsened significantly. By June 2025, Rupali Bank's defaulted loans had surged to Tk22,180 crore, or 44% of total loans. By September, this ratio had climbed to 51%, reaching Tk23,712 crore, a dramatic increase from 21% in December 2023.
Central bank data further reveals that the top 20 defaulters alone account for Tk12,263 crore, or 55% of total defaulted loans. By June, the bank had recovered only Tk90 crore from these borrowers, achieving only 17% of its recovery target.
As of June, Rupali Bank's required capital was Tk9,882 crore, while its maintained capital was a negative Tk13,657 crore. This resulted in a capital shortfall of Tk23,240 crore, along with Tk15,542 crore in provisioning deferrals from the central bank.
So, who are these major defaulters?
Among Rupali Bank's largest defaulters are:
- Blue Planet Group (Tk1,049 crore)
- Beximco Limited (Tk990 crore)
- Bangladesh Sugar and Food Industries Corporation (Tk900 crore)
- Crony Apparels (Tk850 crore)
- Jute Textile Mills (Tk720 crore)
- MSA Textile Limited (Tk580 crore)
- Unitex Group (Tk670 crore)
- Nurjahan Group (Tk630 crore)
- AA Knit Spin (Tk640 crore)
- Madaripur Spinning (Tk620 crore)
- Dolly Construction (Tk505 crore)
It's also worth noting that the defaults are heavily concentrated in a few key branches. Rupali's top five branches account for Tk15,394 crore, or 55.37% of total loans. The Local Office branch alone holds more than 36% of total lending, despite the bank operating 586 branches nationwide. This concentration raises serious questions about risk management and oversight.
Arfan Ali, former managing director at Bank Asia, suggests that deliberate defaulters often avoid multiple branches, withdrawing loans from a select few. He argues that these clients frequently use political influence to control the board and management, concentrating loans in specific branches. He highlights the concerning trend of loan volumes exceeding deposits in some branches, with funds obtained from other branches through interbank transfers, creating opportunities for misuse.
Finally, in 2025, Rupali Bank earned Tk1,732 crore in interest income against Tk2,320 crore in interest expenses, resulting in a negative net interest income of Tk597 crore. Its return on assets and return on equity stood at a meager 0.01% and 0.5%, respectively, underscoring the depth of its financial troubles.
This situation at Rupali Bank raises some serious questions: Was there a systemic failure in risk management? Was political interference a significant factor in these loan approvals? And what steps can be taken to prevent similar crises in the future? What are your thoughts on the role of state-owned banks in Bangladesh's economy? Do you believe that political influence is an unavoidable aspect of lending in developing countries, or is there a way to create a more transparent and accountable system? Share your perspective in the comments below!
