NPLs in banks drop to 30.6% in Q4 on aggressive rescheduling
Nearly 1,300 firms regularise debts, though experts warn of a 'chaotic' surge in defaults by 2027
Non-performing loans (NPLs) in the country's banking sector declined by Tk87,298 crore during the final three months of 2025, primarily driven by a massive debt rescheduling campaign under relaxed central bank policies.
A report by the central bank shows that NPLs stood at Tk5.57 lakh crore at the end of December 2025, accounting for 30.60% of total outstanding loans, down from Tk6.44 lakh crore or 35.73% recorded at the end of September.
Despite the decline, banks-maintained provisions of only Tk2.49 lakh crore against defaulted loans, leaving a provision shortfall of Tk1.91 lakh crore – a situation analysts say poses significant risks to depositors.
Mohammad Ali, managing director of Pubali Bank, told TBS that many borrowers brought their classified loans under rescheduling facilities after receiving regulatory support from the central bank, allowing a substantial volume of loans to move out of the default category.
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Banking sector data shows that following the political transition after the fall of the Sheikh Hasina-led government, the actual scale of previously concealed defaulted loans began to surface.
In September 2024, defaulted loans stood at Tk2.11 lakh crore or 12.56% of total loans, but reassessments later revealed an additional Tk4.33 lakh crore in hidden bad loans accumulated during earlier years.
According to Bangladesh Bank statistics, defaulted loans rose steadily from Tk3.45 lakh crore in December 2024 to Tk4.20 lakh crore in March 2025, before climbing to Tk6.08 lakh crore in June and peaking at Tk6.44 lakh crore in September 2025.
Central bank officials said stricter supervision and verification of loan data, including audits conducted by foreign firms, forced banks to disclose the true extent of bad loans, particularly among several Islamic banks that were later merged.
Since April 2025, loans have been classified as defaulted after three months of non-payment in line with international standards, replacing earlier relaxed rules that allowed longer grace periods.
Bankers attributed the deteriorating loan quality to widespread irregularities, fraud and corruption accumulated over the previous decade and a half, involving several large business groups, including S Alam Group, Beximco Group, Nassa Group, Bismillah Group and Hallmark Group, and major banking scandals that severely weakened both Islamic and conventional banks.
Sector-wise breakdown of NPLs
Defaulted loans at state-owned commercial banks fell to Tk1.46 lakh crore by December 2025 from Tk1.58 lakh crore three months earlier, reducing the default rate to 44.44%.
Private commercial banks recorded a sharper improvement, with defaulted loans declining by Tk73,606 crore to Tk3.89 lakh crore, equivalent to 28.25% of total loans.
Specialised banks also saw a modest reduction, with NPLs falling to Tk18,546 crore from Tk19,298 crore during the same period.
Policy support behind decline
The reduction followed a special policy introduced in September last year, allowing affected borrowers to reschedule classified loans for up to 10 years with only a 2% down payment and a grace period of up to two years.
Around 1,500 companies and business groups applied for the facility, and nearly 1,300 have so far regularised their loans under the scheme, according to central bank officials.
More recently, the Bangladesh Bank further relaxed the terms, permitting loan rescheduling with just a 1% down payment and granting an additional three months for implementation.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said policy support played a key role in reducing defaulted loans, enabling several banks to significantly improve their NPL ratios.
"Many banks have been able to reduce defaulted loans through policy support. As far as I know, some banks had defaulted loans at 10%; through policy support, those banks have brought the defaulted loans down to 5%," he said.
However, the managing director of a private commercial bank warned that the improvement may prove temporary, noting that many rescheduled loans generate limited recovery and could turn non-performing again in the coming years, potentially creating renewed instability in the banking sector by 2027.
