Ten Banks Hold 72% of Bangladesh's Tk 6 Lakh Crore Defaulted Loans

📊 Bangladesh's banking sector is grappling with one of the highest non-performing loan (NPL) ratios in the world, with just 10 banks accounting for over 72% of total defaulted loans of Tk 6,06,555 crore at the end of June 2026. The latest data from Bangladesh Bank paints a damning picture of governance failures, related-party lending and the long shadow cast by political capture of private banks under the previous regime.

According to the central bank's figures, the banking sector's overall NPL ratio now stands at 32.78% — meaning nearly Tk 33 out of every Tk 100 lent by banks is classified as non-performing. Total NPLs rose from Tk 5,88,704 crore at the end of March 2026 to over Tk 6 lakh crore by June, an increase of around Tk 17,851 crore in just three months.

🏛 Ten Banks Bear The Brunt

The concentration of bad debt in a handful of lenders reflects systemic governance failures rather than isolated mismanagement. Islami Bank Bangladesh Ltd (IBBL), once considered the country's flagship private-sector Shariah-compliant lender, recorded the highest volume of NPLs at Tk 98,914 crore at the end of June — equivalent to 52.15% of its total loan portfolio.

A large portion of Islami Bank's defaulted loans is associated with S Alam Group, which took control of the bank in 2017 with political backing. A substantial share of loans taken by the group had become non-performing by the time the Awami League government fell in August 2024, exposing the depth of related-party lending that had been concealed for years through rescheduling and restructuring.

State-owned Janata Bank had the second-highest volume of NPLs at Tk 75,728 crore, representing a staggering 75.05% of its total loans. Beximco Group, associated with former prime minister Sheikh Hasina's adviser Salman F Rahman, is among Janata Bank's largest defaulters, alongside S Alam Group and AnonTex.

• 💰 Total NPLs: Tk 6,06,555 crore (32.78% of total loans)
• 👕 Islami Bank NPLs: Tk 98,914 crore (52.15% of loans)
• 🏛 Janata Bank NPLs: Tk 75,728 crore (75.05% of loans)
• 📈 First Security Islami NPL ratio: 97.08% (highest)
• ⚠ Union Bank NPL ratio: 96.78%
• 📜 Bangladesh NPL ratio (32.6%) vs South Asia average (7.9%)

⚠ Merged Banks In Critical Condition

The merged banks are in the worst position in terms of their NPL ratios, exposing the failure of forced consolidation strategies that combined weak banks without addressing underlying asset quality. First Security Islami Bank had the highest NPL ratio at 97.08%, followed by Union Bank at 96.78%, Social Islami Bank at 78.15% and Exim Bank at 70.81%.

Major defaulters at these banks include S Alam Group, Beximco, Nassa Group and Sikder Group, among several other conglomerates that borrowed aggressively during the previous government's tenure. National Bank had an NPL ratio of 65.74%, while IFIC Bank and AB Bank reported ratios of 63.38% and 56.40% respectively — all far above international prudential thresholds.

State-owned Agrani Bank had a relatively lower NPL ratio of 43.98%, though the absolute volume remains substantial. Its major defaulters include Judge Bhuiyan Group, Zakia Group, Muhib Steel and Ship Recycling, Moon Group and several other companies that borrowed heavily against inadequate collateral.

📜 World Bank Flags Banking Sector As Macro Risk

The World Bank has identified weaknesses in Bangladesh's banking sector as a major economic risk in its June 2026 report. The multilateral lender flagged weak corporate governance, regulatory weaknesses and related-party lending as the primary drivers of asset quality deterioration. According to the World Bank, Bangladesh's NPL ratio of 32.6% at the end of March 2026 is more than four times the South Asian average of 7.9%.

The banking sector represents around 90% of the assets of Bangladesh's overall financial sector, the World Bank noted. As a result, weakness in banks' financial positions affects not only depositors and lenders but also investment, business activity, employment and overall economic growth. The concentration of NPLs in 10 banks means that a targeted reform programme — rather than sector-wide interventions — could meaningfully improve the system's health.

💵 Bangladesh Bank Response And Reform Agenda

Bangladesh Bank has already taken several measures to reduce NPLs, including strengthening loan recovery, tightening supervision of credit management and assessing the quality of banks' assets. The central bank is also identifying weak banks and taking steps towards their reform, merger and restructuring, though early results have been limited.

According to Bangladesh Bank's Financial Stability Report 2025, the NPL ratio in the banking sector rose to 30.60% at the end of December 2025 from 20.20% a year earlier. The volume of defaulted loans increased further during the first six months of 2026, surpassing Tk 6 lakh crore by June and putting additional pressure on banks' capital, provisioning requirements and profitability.

A Bangladesh Bank executive director told The Business Standard that the crisis could not be resolved simply by rescheduling or restructuring loans again. "The actual condition of long-overdue loans must be determined, action must be taken against those responsible, and effective measures must be taken for speedy recovery," he said. The official also stressed the need to assess borrowers' repayment capacity before extending new loans, monitor the use of loan proceeds and strengthen risk controls for large borrowers.

🌏 Implications For The Economy And Export Sector

The concentration of bad debt in a handful of banks carries systemic implications for Bangladesh's export economy. With Janata Bank — one of the largest financiers of trade and remittance flows — facing 75% NPL ratio, the cost of recapitalisation will fall on the government at a time when fiscal space is already constrained by rising debt-servicing burdens. State-owned banks continue to play a critical role in financing export-oriented sectors including RMG, jute and agro-processing, but their deteriorating balance sheets will limit capacity to support new export growth.

For private banks trapped under high NPL ratios, the ability to fund working capital for export-oriented clients is severely constrained. Without meaningful recapitalisation, governance reform and accountability for related-party lending abuses, the banking sector's capacity to finance Bangladesh's post-LDC graduation export ambitions will remain compromised. The next 12-18 months will be critical for determining whether the central bank's reform agenda can stabilise the system or whether the bad-debt crisis will spread from the 10 most affected banks to the rest of the sector.

Otherwise, the executive director warned, the crisis in a handful of banks could gradually create greater pressure across the entire banking system — a contagion risk that Bangladesh's export-driven economy cannot afford.