Taking stock of hidden default loans

About Tk 1.82 trillion in loans in Bangladesh cannot be classified as defaulted due to writ petitions filed before the courts, and the resulting stay orders have long hindered an accurate assessment of the health of these loans. As of March 2026, the total non-performing loan (NPL) ratio stood at approximately 32.26 per cent of total loans. If the loans shielded by stay orders are taken into account, the NPL ratio rises to more than 42 per cent, which is a matter of grave concern for the banking industry in Bangladesh.
Moreover, the industry incurred a cumulative loss of Tk 1.36 trillion in 2025. At a time when Bangladesh is moving towards supervisory frameworks such as Risk-Based Supervision (RBS), Expected Credit Loss (ECL), and Prompt Corrective Action (PCA), the threat posed by defaulted loans could make this transition significantly more challenging.
Although Bangladesh Bank has issued circulars to identify wilful defaulters, the benefits of such initiatives cannot be fully realised due to these writ petitions and stay orders. As a result, many defaulters remain beyond effective scrutiny. They have also been able to keep their loans unpaid for prolonged periods. Consequently, outstanding loan amounts continue to rise because of the accumulation of interest and provisioning requirements.
Compared with neighbouring countries such as India, Pakistan, and Sri Lanka, the situation in Bangladesh appears more alarming, despite the economic challenges faced by those countries as well.
Taking corrective measures and enforcing supervisory regulations can help address these ongoing challenges. However, the proper identification and recognition of problem loans have become imperative for improving the situation. Otherwise, the actual NPL ratio may exceed 50 per cent in the near future.

Kawsik Azad Pronoy
Unit Head
Dutch Bangla Bank PLC
Corporate Business Division