The Bangladesh Bank (BB) has directed all commercial banks to take urgent and decisive measures to curb the sharp rise in non-performing loans (NPLs), warning that the growing volume of bad debts now poses a significant threat to the country’s financial stability.
The directive was issued at a high-level meeting held at the central bank’s headquarters on Wednesday, chaired by Deputy Governor Dr Md Kabir Ahmed. The session brought together managing directors, chief executive officers, and chief financial officers from leading commercial banks to discuss the mounting risks associated with NPLs and to chart a course of corrective action under the theme “The NPL Resolution.”
Central Bank’s Concerns
The move comes in response to serious concerns raised by the International Monetary Fund (IMF) during its ongoing review mission under a US$5.5 billion loan programme. The IMF expressed alarm at the deteriorating asset quality in the banking sector, following reports that defaulted loans have reached unprecedented levels.
According to information disclosed during the meeting, total NPLs across the banking industry exceeded 30 per cent of total outstanding loans by the end of September 2025, a figure that reportedly unsettled the visiting IMF review team.
A managing director of a leading private bank, speaking on condition of anonymity, quoted a senior BB official as saying:
“Commercial banks must now retain an additional 20 per cent of funds to maintain the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). With only 50 per cent of funds available for operations, the capacity of banks to support the economy is being severely constrained.”
Directives to Banks
The central bank instructed all lenders to intensify loan recovery efforts, particularly through cash recovery, restructuring viable accounts, and pursuing legal action where necessary. Banks were urged to make maximum use of existing policy support frameworks to assist borrowers whose businesses remain fundamentally sound but temporarily distressed.
Policy Recommendations from Bankers
| Issue | Concern Raised | Proposed Solution |
|---|---|---|
| Policy Support Eligibility | Borrowers who defaulted after 30 June 2025 are currently ineligible for support. | Extend eligibility under BB’s BRPD Circular No. 7 to December 2025. |
| Legal Bottlenecks | Lengthy writ petitions and frequent stay orders delay recovery. | Mandate a minimum 5% down payment of outstanding liabilities before any writ petition is accepted. |
| Judicial Backlog | Existing loan courts are overburdened. | Increase the number of loan courts to expedite case resolution. |
Several senior executives also stressed that slow legal proceedings and regulatory loopholes have allowed wilful defaulters to delay repayment indefinitely. One chief financial officer of a private commercial bank remarked:
“The recovery process often stalls for years because any defaulter can obtain a stay order. We’ve proposed reforms to ensure accountability within the judicial process.”
Broader Implications
Financial analysts warn that if left unchecked, the current trend could undermine the resilience of Bangladesh’s banking system and threaten investor confidence. Rising NPLs reduce banks’ ability to lend, tighten liquidity, and increase capital adequacy pressures—potentially impeding private sector growth.
The central bank is expected to issue a follow-up circular within the coming weeks, outlining a revised NPL reduction roadmap, including stricter reporting requirements and enhanced supervisory oversight.
As Bangladesh seeks to maintain financial sector stability under the IMF-supported programme, the success of these new directives will depend heavily on robust enforcement, judicial reforms, and institutional discipline across the banking system.