Bangladesh has been ranked as the second-highest country globally for non-performing loans, with around one-third of bank lending marked as defaulted, according to a report by The Business Standard based in Bangladesh. The country holds the highest Non-Performing Loan (NPL) ratio among SAARC nations, primarily due to issues like weak credit discipline, politically influenced lending, and poor loan recovery practices.
The report highlights that Ukraine leads the global list with an NPL ratio of 37.35%, mainly due to the economic impact of the ongoing war. Following Ukraine, Bangladesh holds the second position with an NPL ratio of 32.26%, surpassing countries like Chad and Guinea in terms of non-performing loans.
Data from Bangladesh Bank reveals that non-performing loans in the country surged to Tk 5.89 lakh crore by the end of March, showing an increase of Tk 31,000 crore in just three months. The total outstanding loans in Bangladesh amount to Tk 18.25 lakh crore, and when considering restructured loans and special mention accounts, stressed assets reach Tk 11.2 lakh crore, constituting approximately 61% of the banking system’s loan book.
Bankers mentioned in the report expressed concerns about politically influenced lending decisions that have weakened credit standards in Bangladesh. Many loans were reportedly approved based on connections rather than the borrowers’ repayment capacity, impacting the sector’s overall credit quality.
The banking sector in Bangladesh faces a significant capital deterioration, as the aggregate Capital to Risk-Weighted Assets Ratio (CRAR) dropped to -2.64% by the end of 2025 from 3.08% a year earlier, significantly below the regulatory minimum of 12.5%. In comparison, Pakistan maintains a CRAR of 20.8%, followed by Sri Lanka at 19.4%, and India at 17.2%.
Md Touhidul Alam Khan, the Managing Director and CEO of NRBC Bank, highlighted that Bangladesh’s banking sector significantly differs from its regional counterparts, indicating that neighboring economies have shielded their banking sectors through strict macro-prudential discipline, while Bangladesh has repeatedly faced corporate and credit shocks.
The surge in defaulted loans has compelled banks in Bangladesh to increase provisions, leading to higher litigation costs, reduced profitability, and constraints on extending fresh credit to productive sectors.
