Despite multiple regulatory interventions designed to curb asset deterioration, non-performing loans (NPLs) rose across 44 of Bangladesh’s 61 scheduled banks during the January–March quarter. Senior officials at the central bank, Bangladesh Bank, described the widespread increase as an unprecedented contraction in asset quality.

The negative trajectory was not confined to financially distressed institutions; several heavily capitalised and traditionally stable commercial banks, including City Bank, Prime Bank, Bank Asia, Uttara Bank, and foreign-owned Standard Chartered Bank Bangladesh, also registered notable increases in their defaulted portfolios.

System-Wide Aggregates and Driving Factors

During the three-month period, the combined volume of non-performing loans across the 44 affected banks grew by Tk31,487 crore. System-wide, total defaulted credit stood at Tk5.88 lakh crore at the end of March, representing 32.26% of all outstanding loans. This is an increase from December, when total NPLs stood at Tk5.57 lakh crore, or 30.60% of outstanding credit.

Central bank inspectors attributed the surge to two main factors:

1. Uncovering of Concealed Debt: Subsequent audits exposed defaulted loans that had been understated or hidden in the December quarter data, necessitating sharp upward revisions.

2. Economic Stagnation: Broader macroeconomic disruptions have weakened the revenue generation and debt recovery capacities of commercial borrowers across the board.

Asset Quality Review by Banking Tier

The fiscal deterioration heavily impacted both state-owned enterprises and private commercial institutions:

State-Owned Commercial Sector

Total NPLs across the six state-owned banks grew by Tk3,677 crore, reaching Tk1,49,785 crore and accounting for 45.85% of their combined loan books. Four public lenders registered notable increases. This segment was led by Janata Bank, where NPLs escalated by Tk2,258 crore to Tk75,000 crore, a figure representing nearly 74% of its entire loan allocation.

Private Commercial Sector

The private banking sector experienced the sharpest volumetric deterioration. Combined NPLs across 43 private banks rose by Tk26,903 crore to Tk4,16,000 crore, making up 30.11% of their collective advances. Within this sector, 34 banks reported a rise in toxic assets. The table below details the specific quarterly increases across the private, state-owned, specialized, and foreign banking tiers:

Executive and Analytical Perspectives

Senior banking executives have identified structural macro-pressures, post-moratorium effects, and governance deficits as the primary drivers of this trend.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, stated that ongoing economic stagnation has restricted commercial expansion and lowered repayment capacity. He noted that some major corporate borrowers are increasingly dependent on central bank policy relaxations to manage their obligations.

Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, outlined five core factors causing the escalation in non-performing loans:

“Stricter auditing by the central bank is forcing previously hidden defaults to the surface, while the expiration of repayment moratoriums and deferred facilities has forced banks to reclassify stressed accounts.

Simultaneously, high inflation, rising borrowing costs, and international trade disruptions are compressing corporate cash flows. These issues are further compounded by institutional governance flaws in risk assessment and collateral appraisal, alongside political interference in lending, which fosters a culture of wilful default among influential borrowers.”

— Md Touhidul Alam Khan, Managing Director and CEO of NRBC Bank