Rupali Bank’s Forced Loans Near $2bn

The volume of forced loans at Rupali Bank rose to $1.87 billion by the end of December 2025, marking a sharp increase over four years and signalling mounting stress within the lender’s financial position, according to an inspection by the Bangladesh Bank.

Data from the central bank shows that forced loans have grown by 91.59% since 2021, when they stood at $976 million. The figure rose steadily to $1.23 billion in 2023 and $1.49 billion in 2024, before reaching the latest level in 2025.

Growth in Forced Loans

In banking practice, forced loans arise when importers fail to settle liabilities under letters of credit (LCs) within the stipulated time. In such cases, the bank pays the overseas supplier from its own funds and subsequently records the unpaid amount as a loan in the importer’s name. Officials state that the increasing volume reflects persistent failures by importers to honour LC obligations, placing pressure on liquidity and weakening asset quality.

Economists view rising forced loans as a warning indicator of deteriorating financial health, as they heighten the likelihood of these exposures turning into non-performing loans (NPLs). Dr Md Ezazul Islam, Director General of the Bangladesh Institute of Bank Management, said the trend indicates financial fragility. He noted that when forced loans approach $2 billion, it reflects substantial payments already made to foreign banks without corresponding recovery from importers. He also cautioned that such loans may arise through both operational failures and, in some cases, collusion, underscoring the need for stronger board oversight.

According to bank officials, a significant share of these loans is linked to the garment sector, where payments against LCs opened by exporters were not settled on time.

The central bank inspection also identified serious irregularities in foreign exchange operations. Rupali Bank reportedly paid $2.20 billion to overseas entities for imports but could not provide corresponding bills of entry confirming that the goods entered Bangladesh. A large portion of these documents remains outstanding, raising concerns about potential trade-based money laundering and unverified capital outflows.

In March, Bangladesh Bank rejected the bank’s application to open a new authorised dealer (AD) branch in Rajarbagh, citing weaknesses in risk management. The decision followed findings that key foreign trade indicators—imports, exports, remittances, and documentation compliance—have declined in recent years.

Key Foreign Exchange Indicators

The inspection of five AD branches uncovered 46 serious irregularities, including concealment of liabilities, unauthorised creation of forced loans, and issuance of compliance certificates in violation of rules. The bank also received an “unsatisfactory” rating in internal control and compliance, credit risk management, and ICT security.

As of 31 December 2024, Rupali Bank’s total NPLs stood at Tk21,358 crore, representing 41.60% of its loan portfolio, further indicating financial strain.

In response, a senior bank official stated that around 95% of outstanding bills of entry are linked to imports by the Bangladesh Petroleum Corporation. Central bank officials attributed discrepancies partly to tariff valuation issues, noting that discussions among the corporation, the National Board of Revenue, and the regulator are ongoing without resolution.

The bank also cited exchange rate fluctuations and post-pandemic disruptions, including cancelled orders in the garment sector, as contributing factors behind delayed payments. It added that improved foreign exchange operations, including the possibility of a new AD licence, could help stabilise the situation.