Bangladesh’s banking sector is grappling with an alarming surge in non-performing loans (NPLs), which soared by nearly Tk 750 billion in just three months to reach a record Tk 4.2 trillion by March 2025.

This accounts for 24.13% of total outstanding loans—the highest on record—raising serious concerns about banking stability and credit flow.

Of the Tk 17.42 trillion in total loans disbursed by 61 commercial banks, a staggering Tk 3.41 trillion—over 81% of all classified loans—is now categorized as bad/loss loans, according to Bangladesh Bank data.

The rapid deterioration in asset quality has triggered liquidity constraints and dampened credit growth, with banks being forced to set aside more capital for provisioning.

A major contributing factor to the spike was Bangladesh Bank’s revised loan classification system, which now requires term loans overdue for more than six months (down from nine) to be classified as NPLs. From March 31, 2025, this window will be further shortened to three months, potentially worsening the outlook.

• State-owned commercial banks (SoCBs): NPLs hit Tk 1.64 trillion, or 45.79% of their total loans.

• Private commercial banks (PCBs): Classified loans reached Tk 2.64 trillion or 20.16%.

• Foreign commercial banks (FCBs): NPLs totaled Tk 32.38 billion (4.83%).

• Specialized banks (SBs): NPLs stood at Tk 64.94 billion (14.47%).

While improved transparency and reforms are seen as long-term positives, banking insiders warn that the worsening NPL trend could undermine investor confidence, raise the cost of borrowing and further constrain already conservative lending practices.

Unless swift governance reforms and risk management improvements are enforced—alongside macroeconomic stability—the sector could see further deterioration, experts fear.