NPLs jump by Tk31,000cr in three months

Non-performing loans in the country's banking sector rose by more than Tk31,000 crore in the three months to March, reaching Tk5.89 lakh crore amid weak credit growth, slower recovery and reclassification of stressed assets, according to Bangladesh Bank data.

Non-performing loans accounted for 32.26% of total outstanding credit, which stood at Tk18,24,668 crore.

Infographics: TBS

This reflects a sharp escalation from the preceding October-December quarter, which closed with default loans at Tk5,57,216 crore, representing 30.60% of total disbursements. 

The latest figures also mark an increase of over Tk1,36,088 crore compared to March 2025, when the NPL ratio stood at 24.13%, underscoring a rapid deterioration in asset quality over the past 12 months.

Bangladesh Bank spokesperson and Executive Director Arief Hossain Khan disclosed the data to journalists yesterday.

The central bank data shows that in September, non-performing loans stood at Tk6,44,515 crore, equivalent to 35.73% of total disbursed loans. The decline seen in the December quarter was attributed by officials to policy support measures extended by Bangladesh Bank at the time.

Bankers said the increase in NPLs was driven by three main factors, starting with a marked slowdown in private sector credit growth.

Private sector credit growth fell to 4.72% in March this year, limiting the expansion of overall lending and making the proportion of classified loans appear higher. 

Bankers also said the weak credit environment reflects broader macroeconomic stress, with businesses reducing borrowing and struggling to repay existing obligations amid weaker demand and external pressures, including earlier disruptions in global energy markets.

The second factor cited is lower recovery of defaulted loans, combined with the continuous accrual of interest on overdue amounts.

Arief said loan recovery has been weaker than expected, while interest is added regularly each quarter, increasing the stock of classified loans.

The third factor is stricter supervisory assessment by the central bank during the finalisation of banks' financial statements.

Officials said Bangladesh Bank applied qualitative assessment tools during inspections, leading to the reclassification of some loans as non-performing, which contributed to the rise in reported figures.

What bankers say

Speaking to TBS, several private bank managing directors said write-off activity is typically lower in the first quarter and higher at year-end when banks seek to present stronger balance sheets.

A senior banker said that many institutions are not following International Financial Reporting Standards strictly in write-off decisions, opting instead for rescheduling loans.

He added that excessive reliance on rescheduling without proper write-offs could prolong the problem and potentially worsen the accumulation of bad loans.

Another senior banker noted that loans are classified as overdue after 90 days, a threshold he said has contributed to the recent increase in reported non-performing loans.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, said the current economic conditions are making it difficult for many firms to operate normally and repay loans on time.

He said the economy is experiencing a period of stagnation, limiting business expansion and affecting repayment capacity, while some large firms are also relying on policy support from the central bank.

Md Touhidul Alam Khan, managing director and chief executive officer of NRBC Bank, identified five key drivers behind the rise in non-performing loans.

He said previously concealed bad loans are now being exposed under stricter oversight, while the expiry of moratoriums and deferred repayment facilities has forced banks to reclassify stressed accounts.

He also cited inflation, rising borrowing costs and global trade disruptions as factors affecting cash flows, along with governance weaknesses in credit assessment and collateral valuation. He added that political interference in lending decisions had contributed to a culture of default among influential borrowers.

Bank-wise breakdown

Data from Bangladesh Bank shows that non-performing loans increased across all categories of banks in the March quarter.

State-owned banks recorded an increase of Tk3,677 crore, bringing total classified loans to Tk4,16,481 crore in March, up from Tk3,89,579 crore in December.

Private commercial banks saw the largest increase, with non-performing loans rising by Tk26,902 crore over the quarter.

Foreign banks recorded an increase of Tk278 crore, taking their total to Tk3,262 crore in March from Tk2,983 crore in December.

Specialised banks also saw an increase of Tk628 crore, with classified loans rising from Tk18,546 crore to Tk19,174 crore over the same period.