One in every three taka lent by Bangladesh’s banks is now in default. That stark figure captures the growing pressure on the country’s banking sector, where defaulted loans surged again in the first quarter of 2026, raising fresh concerns over financial stability, weak recovery, and the ability of banks to support investment and economic growth.
According to the latest Bangladesh Bank data, non-performing loans increased by Tk 31,487 crore during the January–March period, reaching Tk 588,704 crore by the end of March. Total outstanding loans in the banking sector stood at Tk 1,824,668 crore, meaning 32.26 percent of all bank loans had become non-performing.
The ratio increased from 30.60 percent in December, when defaulted loans stood at Tk 557,217 crore. The latest rise reversed the temporary decline seen at the end of last year, when large-scale rescheduling and special policy support had helped reduce the reported NPL ratio.
The numbers show that the banking sector remains under severe stress despite repeated loan rescheduling, renewal facilities, special concessions, and regulatory support offered to borrowers over the years.
“Loan defaulting has emerged as a damaging culture in the country,” Mustafa K. Mujeri, executive director of the Institute for Inclusive Finance and Development and former chief economist of Bangladesh Bank, has said.
He added that some of the country’s largest business conglomerates had become loan defaulters despite receiving policy support from the government and Bangladesh Bank. “These groups have received various forms of policy support from the government and Bangladesh Bank over the years, yet they still fail to repay their loans,” he said.
The pressure is most visible in state-owned commercial banks. Their defaulted loans stood at about Tk 149,785 crore at the end of March, equal to roughly 46 percent of their total disbursed loans. This means nearly half of loans issued by state-owned commercial banks are now classified as non-performing.
Private commercial banks reported Tk 416,482 crore in defaulted loans, accounting for about 31.1 percent of their total lending. State-owned specialized banks had Tk 19,175 crore in non-performing loans, representing about 41 percent of their loan portfolio. Foreign banks remained comparatively stronger, with Tk 3,263 crore in defaulted loans, or about 5 percent of their outstanding credit.
Internationally, a banking sector is generally viewed as being under risk when non-performing loans exceed 3 percent of total credit. Bangladesh’s current NPL ratio of more than 32 percent is over ten times that threshold, underlining the depth of the crisis.
The official figures, however, may still not show the full extent of the problem. Large amounts of troubled loans remain outside the NPL calculation because of court-issued stay orders, restructuring arrangements, special regulatory concessions, and other temporary facilities. In addition, around Tk 55,000 crore in written-off loans are excluded from the official defaulted-loan statistics.
Banking insiders estimate that another Tk 200,000 crore to Tk 250,000 crore in potentially defaulted loans may remain outside the current calculations. If included, the real burden of distressed assets would be significantly higher than the official figure.
The growing default burden has also widened the provisioning gap. As of March, banks were required to maintain provisions of Tk 461,714 crore against classified and regular loans. Actual provisions stood at Tk 256,049 crore, leaving a shortfall of Tk 205,665 crore.
The deficit increased by Tk 14,224 crore in just three months. In December, the provision shortfall had stood at Tk 191,441 crore.
A provision shortfall weakens banks because it reduces their ability to absorb losses from bad loans. When banks do not hold enough provisions, losses may eventually eat into profits and capital, further weakening their financial position.
Another warning sign is the sharp rise in Special Mention Accounts, or SMA loans, which are considered one step before becoming non-performing. SMA loans increased to Tk 132,120 crore in March from Tk 103,374 crore in December, a rise of Tk 28,746 crore within one quarter.
The increase suggests that more loans may slip into default in the coming months, putting further pressure on banks already struggling with weak recovery, liquidity stress, and capital erosion.
The wider economic slowdown has also added to the pressure. Many borrowers are facing lower demand, high borrowing costs, inflationary pressure, and uncertainty linked to both domestic and global conditions. Bankers say some previously regular loans are now showing signs of stress.
Speaking at an Atlantic Council event in Washington on April 16, on the sidelines of the IMF and World Bank spring meetings, Bangladesh Finance Minister Amir Khosru warned that the country must address capital shortages in both the banking sector and private sector before broader reforms can succeed.
“The first thing to be approached is to replenish the capital deficit that is there in the private sector, replenish the capital in the banking sector,” Khosru said at the event, according to Reuters. “Without this, talk about any other reforms is not going to get us anywhere.”
He described the capital deficit as serious and said the private sector was under strain. “The private sector now needs to be salvaged. This is a big challenge,” he said, adding that “a lot of banks are practically bankrupt.”
The World Bank has also warned that Bangladesh’s banking sector is vulnerable because of long-standing structural weaknesses, high non-performing loans, low capital adequacy, operational inefficiencies, weak corporate governance, regulatory capture, political influence in lending, and related-party lending.
The Bank said reforms are urgently needed to restore financial sector stability, strengthen prudential regulation, improve governance and risk management, restructure state-owned banks, establish a robust NPL management framework, enforce banking regulations, and ensure the full independence of Bangladesh Bank.
The latest Bangladesh Bank figures therefore point to more than a short-term rise in defaulted loans. They reflect deeper weaknesses in loan discipline, governance, supervision, recovery mechanisms, and capital strength.
Unless the authorities take effective steps to improve recovery, enforce accountability, strengthen governance, and rebuild capital buffers, the growing burden of bad loans could further undermine banks’ ability to finance businesses, support investment, and contribute to economic growth.
For now, the message from the data is clear: one in every three taka lent by Bangladesh’s banks is already in default, and the pipeline of troubled loans suggests the crisis may not yet have reached its peak.
