The long-standing practice of masking defaulted loans through policy support has effectively ended following the change of government, exposing the true scale of financial stress within Bangladesh’s banking sector. With this protective layer removed, the volume of classified loans has surged into full view, pushing the total value of defaulted loans close to Tk 650,000 crore. The revelation has intensified pressure on banks to recover overdue funds, with the courts now emerging as the primary route for enforcement.
As banks confront the reality of their balance sheets, litigation has accelerated sharply. Between April and June alone, banks filed 14,652 lawsuits seeking to recover nearly Tk 97,000 crore in unpaid loans. According to Bangladesh Bank, the cumulative amount of defaulted loans currently under judicial process stands at Tk 407,435 crore, underscoring the scale of the challenge facing the financial system.
Central bank data show a steady and troubling rise in both the number of cases and the value of loans tied up in litigation. By the end of June, financial loan courts were handling 222,341 cases involving Tk 407,435 crore. Just three months earlier, at the end of March, the figures stood at 219,633 cases with Tk 320,761 crore pending—indicating a sharp increase in the value of claims within a relatively short period.
Defaulted Loans in Financial Loan Courts
| Period | Number of Cases | Amount Involved (Tk crore) |
|---|---|---|
| End of March | 219,633 | 320,761 |
| End of June | 222,341 | 407,435 |
| April–June (new cases) | 14,652 | ~97,000 |
These figures were formally presented at a meeting of bank chief executives held at Bangladesh Bank yesterday. Governor Dr Ahsan H Mansur, addressing the gathering, directed banks to accelerate the resolution of defaulted loan cases. He emphasised that faster settlements and more assertive recovery efforts are essential to restoring confidence in the banking sector and improving liquidity.
Banking insiders say the surge in lawsuits reflects a fundamental shift in enforcement culture. Under the previous administration, many influential borrowers benefited from regulatory leniency or restructuring facilities that effectively concealed their defaults. With that era over, banks are now moving aggressively to initiate legal action. A significant number of large borrowers—once considered untouchable—have been named in recovery cases, with some reportedly absconding and others already in custody.
The judicial system, however, faces mounting strain. To cope with the growing caseload, the government has increased the number of financial loan courts from four to seven this year. While this expansion is expected to ease bottlenecks, legal experts caution that meaningful recovery will also depend on faster case disposal, stronger asset-tracing mechanisms and closer coordination between banks and law enforcement agencies.
The exposure of hidden defaults has marked a turning point for Bangladesh’s banking sector. While the immediate picture is unsettling, policymakers argue that confronting the problem openly is a necessary step towards long-term stability. Whether the courts can deliver timely recoveries on such a vast scale will now be a decisive factor in determining the health and credibility of the country’s financial system.