Bangladesh Bank Loans Under Court Stay Jump Eightfold to Tk 182,419 Crore

Dhaka, July 27, 2026 — Bank loans tied up under court stay orders in Bangladesh jumped more than eightfold over the three years to the end of 2025, reaching Tk 182,419 crore, according to a Bangladesh Bank (BB) report. The staggering surge in stay-protected credit exposes a structural loophole in the country's loan recovery framework and adds fresh pressure on an already fragile banking sector grappling with record levels of non-performing loans (NPLs). ⚠

📊 The amount of loans shielded by court stay orders rose by 80 percent in 2025 alone, climbing from Tk 101,429 crore at the end of 2024 to Tk 182,419 crore by the end of 2025 — signalling a sudden surge in borrowers seeking judicial protection from bank recovery proceedings. The upward trajectory began from a base of just Tk 21,226 crore at the end of 2022, with growth shifting from steady to explosive during the 2023-2024 period when the value of frozen capital more than doubled in twelve months.

📈 Cases Nearly Quadrupled

👥 The number of stay order cases rose nearly fourfold, from 226 in 2022 to 845 in 2025, as more borrowers turned to the courts to block bank attempts at classifying them as defaulters or auctioning mortgaged collateral. The sharp rise in loans under stay orders comes as the country's banking sector is already struggling with a record volume of bad loans, adding to pressure on an already fragile financial system that has been the subject of repeated warnings from international ratings agencies.

🏛 Bangladesh Bank, in its Financial Stability Report 2025, expressed alarm at the trend and called for urgent reforms to the legal framework governing loan recovery:

"The persistent growth in loans under stay orders suggests considerable stress on the banking sector's liquidity and earnings. Faster disposal of banking cases and policy measures to remove legal bottlenecks would help strengthen financial stability."

💰 A Snapshot of the Banking Sector's Distress

📊 At the end of 2025, the broader picture of Bangladesh's banking sector stress shows multiple categories of distressed assets all rising simultaneously:

• ⚠ Defaulted loans: Tk 557,217 crore
• 📜 Unclassified rescheduled loans: Tk 268,733 crore
• 📝 Written-off loans: Tk 83,479 crore
• ⚖️ Loans under court stay orders: Tk 182,419 crore

💰 All four categories increased during 2025, painting a picture of a banking sector under mounting stress from multiple fronts — a context that has contributed to recent decisions by S&P Global and Fitch Ratings to revise Bangladesh's sovereign outlook to negative.

🏛 Bankers Speak Out

🤝 Mati Ul Hasan, Managing Director of Mercantile Bank PLC, said banks are making a concerted effort to recover defaulted loans, but some borrowers are seeking stay orders specifically to block those efforts. He described the operational impact on banks:

"A stay order means that all our recovery proceedings come to a halt. If we take steps to auction a property and a stay order is issued, we cannot proceed until it is vacated. This is a major challenge to loan recovery. The overall effect is that our cash flow is affected, and funds remain blocked, reducing our capacity to extend new loans."

💼 Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank PLC, said the growing number of defaulters has naturally led to more borrowers seeking stay orders. He called for a structural reform to discourage frivolous petitions:

"While I understand that going to court is a fundamental right, there should be a provision requiring borrowers to make a down payment of a certain portion of the loan before obtaining a stay order. This would discourage many borrowers from going to court."

⚖️ The Three-Stage Strategic Default Playbook

🏛 Mashrur Arefin, Chairman of the Association of Bankers, Bangladesh (ABB) and Managing Director and CEO of City Bank, offered the most detailed critique, saying the growing use of writ petitions has shifted from protecting constitutional rights of aggrieved parties to becoming an operational tool for serial defaulters. He described a typical three-stage pattern:

📜 Stage 1: CIB stay on classification. Borrowers obtain a High Court stay order on their Credit Information Bureau (CIB) records, allowing them to maintain their reputation, continue banking activities, and even secure fresh loans despite being effectively in default.

📜 Stage 2: Stay on collateral auction. When banks move to auction mortgaged properties to recover dues, borrowers seek another stay order, making it much harder for banks to convert collateral into cash.

📜 Stage 3: Endless legal ping-pong. Banks become caught in lengthy legal proceedings between lower courts and the High Court, delaying recovery efforts for three to four years and allowing cases to pile up.

"The ultimate victim is the financial ecosystem. With time being taken that way, the value of recovery reduces, legal costs go up, liquidity gets locked, and credit discipline suffers."

⚖️ Legal Community Calls for More Courts

🗜 Barrister Shamim Khaled Ahmed said many defaulters obtain stay orders from the High Court to stop banks from classifying them as defaulters. However, he cautioned that not all stay orders involve defaulting borrowers — in some cases, bank directors also seek stay orders, suggesting the practice is broader than just strategic defaulters.

"The number of stay orders related to loans is growing because there are only two courts dealing with banking matters. We should increase the number of courts to speed up the settlement of these cases. The longer the delay, the more serious the damage to the banking sector."

👥 CPD: A Governance and Stability Issue

🏛 Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said the increase shows another weakness in the banking sector, which is already burdened by a high volume of non-performing loans. She framed the issue as a multidimensional governance and financial stability challenge:

"It looks like Bangladesh is dealing with several issues simultaneously, including officially recognised NPLs, major gaps in provisions, loans that have been written off but still have not been recovered, and a rapidly increasing number of loans under judicial stay orders."

📊 The CPD executive director emphasised that the stay order issue is especially important from a governance perspective, but cautioned against assuming every borrower requesting a stay is intentionally defaulting:

"Courts play a vital role in protecting honest borrowers' rights, and not every borrower requesting a stay should be viewed as intentionally defaulting. However, when such a large amount of bank credit is tied up under stay orders, the wider economic impact can be serious. Lengthy legal proceedings can slow down recovery efforts, weaken the rights of creditors, and encourage strategic borrowers to use litigation as a way to delay repayment."

💰 Capital Adequacy Implications

⚠ Fahmida Khatun also raised the issue of bank capital adequacy. If banks cannot set aside enough provisions for deteriorating assets because they are protected by stay orders, their reported capital might not truly reflect the financial losses in their loan portfolios. Recognising these losses and setting aside sufficient reserves could reveal capital weaknesses in some banks, she said, adding that the issue goes beyond just loan recovery — it is fundamentally about maintaining financial stability.

📈 Outlook and Reform Imperatives

🏛 The eightfold surge in court-stayed loans over three years represents one of the most striking indicators of the structural weaknesses in Bangladesh's banking sector recovery framework. With the country's bad loan stock already at record levels and international ratings agencies adopting a more cautious stance on Bangladesh's sovereign credit profile, the trajectory of stay-protected credit adds another layer of concern for policymakers.

📊 Bangladesh Bank's call for faster disposal of banking cases and the legal community's recommendation to increase the number of banking courts point to a clear reform direction. The introduction of a mandatory down payment requirement before stay orders are granted — as suggested by senior bankers — could also help reduce frivolous petitions while preserving the constitutional right to judicial recourse.

🌏 With the financial sector already under the microscope of international observers and the IMF programme setting reform milestones for the banking sector, addressing the stay order loophole is likely to be a key priority for the government in the coming months. The cost of inaction — in terms of locked liquidity, weakened credit discipline, and delayed recovery — will only compound with each passing year if the structural issues are not addressed.