Financial Red Alert: NPL Crisis Now Bigger Than the Nation’s Total Tax Revenue!

Bangladesh’s banking sector is reeling from an extraordinary surge in non-performing loans (NPLs), with the total volume of classified loans hitting a historic high of Tk 6.44 trillion by September. This marks a dramatic rise of Tk 2.24 trillion in just six months, sending shock waves through the financial system.

Latest central bank figures reveal that the NPLs now account for a staggering 35.73% of all loans, amounting to Tk 18.04 trillion, disbursed by commercial banks. This is a sharp climb from Tk 2.85 trillion and 16.93% just a year earlier, signalling one of the steepest deteriorations in banking asset quality in Bangladesh’s history.

Industry insiders warn that this alarming jump in bad loans is straining liquidity management, eroding profitability, and threatening the stability of the sector. Banks are being forced to set aside larger provisions, further squeezing their operational space.

A key driver of this surge was the central bank’s decision in March to shorten the overdue-status period for term loans to three months from the previous six, instantly amplifying the volume of classified loans.

To put the crisis into perspective, the gross NPL volume is now nearly double the total tax revenue of Tk 3.71 trillion collected by the National Board of Revenue (NBR) in FY25—an unprecedented imbalance.

Net NPL Reality

Central bank statistics show that net classified loans—after deducting provisions and suspended interest—stood at Tk 4.16 trillion, representing 26.40% of total loans by September. While lower than the gross figure, the ratio still paints a worrying picture. By June, the net NPL stood at Tk 3.88 trillion with a ratio of 25.08%, indicating rapid deterioration.

The Bangladesh Bank stresses that net NPL calculations offer a clearer view of actual risk exposure. By excluding amounts already provisioned, net NPLs highlight the portion of loans still vulnerable to loss.

For example, if Tk 1 billion in loans is classified as bad, with Tk 100 million in suspended interest and Tk 400 million in provisions, the net NPL becomes Tk 500 million. Compared to Tk 10 billion in total loans, the net NPL ratio stands at 5.26%.

Bankers Sound the Alarm

Bank executives express grave concerns. Shahjalal Islami Bank PLC’s Managing Director Mosleh Uddin Ahmed notes that under the central bank’s enhanced risk-based supervision (RBS), banks now submit about 200 interlinked data points, leaving “no scope to hide anything”. He believes that the unveiling of the true NPL picture is shaking public confidence.

Modhumoti Bank PLC’s CEO, Md Shafiul Azam, observes that many banks previously failed to disclose the actual extent of bad loans. With the revised counting method, full disclosure is now unavoidable. He adds that prolonged economic stagnation has pushed many borrowers into distress, fuelling the classification surge.

Mutual Trust Bank PLC’s CEO, Syed Mahbubur Rahman, says the exponential growth of NPLs is “not unexpected”, though the central bank has rolled out policy measures aimed at supporting stressed businesses.

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