Bangladesh Bank is determined to slash default loans to below 8% of the country’s total outstanding loans by June 2026, aiming to fortify corporate governance in the banking sector.

Deputy Governor Abu Farah Md Nasser unveiled the action plan during a press conference at the bank’s Dhaka headquarters.

The central bank has outlined specific targets for state commercial banks and private banks to achieve the goal. The action plan, shared at the briefing, sets a target of reducing nonperforming loans (NPLs) for state commercial banks to 10% and private banks to below 5% within the next two and a half years.

As of September 2023, the gross NPL ratio in the entire banking sector had climbed to 9.93%, a slight increase from 9.36% in September 2022. The specific ratio of default loans in June 2023 was recorded at 10.11% of the total outstanding loans.

State banks faced a significant challenge, with their NPL ratio at 21.7% of outstanding loans at the end of September last year. Meanwhile, private banks exhibited a comparatively lower NPL ratio of 7.04%, according to data provided by Bangladesh Bank.

The new action plan signals a comprehensive approach to address the issue of default loans and enhance the overall health of the banking sector.