An alarming financial scandal is shaking Bangladesh’s banking sector to its core, as nearly Tk 1.75 trillion in defaulted loans has been traced back to a group of powerful bank directors and owners, raising serious concerns about insider abuse, systemic corruption, and weak regulatory enforcement.
According to the latest report by Bangladesh Bank, the total amount of non-performing loans (NPLs) in the banking system stood at Tk 4.2 trillion as of March 2025-equivalent to approximately $38 billion. Shockingly, around 44 percent of that-Tk 1.75 trillion-was borrowed either directly or indirectly by individuals who held positions on the boards of banks, or were linked to them through complex corporate structures and proxy arrangements.
Many of these loans were issued over years through a practice where bank directors granted massive loans to one another across different institutions, exploiting legal loopholes that restrict directors from borrowing from their own banks. By sitting on each other’s boards and using influence within financial institutions, they bypassed restrictions designed to prevent conflict of interest and fraud. The outcome was a sophisticated scheme of mutual enrichment, draining the banks of depositor funds while leaving little in the way of accountability.
Before the change of government in August 2024-sparked by a popular uprising involving students and civil society-directors collectively held over Tk 2.35 trillion in loans. Following the restructuring of several bank boards under the new administration, the figure fell by nearly Tk 600 billion within just four months. Yet, experts caution that the problem remains far from resolved.
Economists and banking professionals agree that the root of the crisis lies in the chronic lack of oversight, poor implementation of laws, and a culture of impunity. Former World Bank lead economist in Dhaka, Dr Zahid Hussain, observed that directors openly exploited the weaknesses in banking laws, forming informal alliances to help each other secure large loans across the sector. “Unless the laws are amended and enforced with rigour,” he warned, “such abuses will continue to drain the financial system.”
The response from within the banking industry has been mixed. Syed Abu Naser Bakhtiar Ahmed, Chairman of state-owned Agrani Bank, acknowledged the gravity of the situation. He explained that many directors lost their eligibility after board reshuffles and are now categorised as ordinary defaulters. Some of the country’s most controversial borrowers have already approached banks to settle debts, but he insisted that mortgaged assets must be seized and sold off to recover depositors’ money. “Even if we can’t recover the full amount, we must make an example to prevent such audacity in future,” he said.
Private banks have also begun legal action. Nazmus Sadat, Managing Director of Social Islami Bank Ltd (SIBL), said his institution has filed cases under the Negotiable Instruments Act and the Money Loan Court. “Several defaulters have agreed to repay, and our recovery has already improved,” he noted, adding that legal pressure is pushing many towards negotiation.
Documents reviewed from Bangladesh Bank and financial insiders have pointed to a few powerful business groups at the centre of the crisis. Among them, the S. Alam Group is alleged to have taken over multiple banks, including Islami Bank, from which directors extracted Tk 270 billion. The NASA Group is said to have drawn Tk 135 billion from EXIM Bank, which it controls. Beximco Group, led by industrialist and current political figure Salman F Rahman, and United Commercial Bank are also implicated in borrowing Tk 100 billion each. In addition, Southeast Bank directors received over Tk 60 billion in loans.
These figures expose a shocking concentration of debt in the hands of individuals with boardroom power. From 2016 to 2024, director-held loans rose from Tk 900 billion to Tk 2.35 trillion-a 160% increase-mirroring the rise in influence of some business groups over the banking sector.
In some cases, the scale of abuse is staggering. One senior Bangladesh Bank official, speaking on condition of anonymity, revealed that eight banks’ directors contributed a combined Tk 24 billion in paid-up capital but managed to borrow Tk 450 billion from each other’s banks. “This reflects the institutionalised nature of corruption in our financial system,” the official said.
Although the central bank issued a directive in 2014 prohibiting directors from borrowing more than 50% of their paid-up capital from their own banks, that regulation was routinely ignored through interlocking board memberships and secret arrangements.
The collapse of at least 11 group-dominated bank boards since August has created some breathing room for regulators. Still, many of the former directors remain as shareholders, continuing to wield influence behind the scenes. According to banking insiders, if off-the-book lending and proxy borrowing were properly accounted for, the total amount of director-related loans could surpass Tk 5 trillion.
Responding to mounting criticism, Bangladesh Bank spokesperson Arif Hossain Khan acknowledged past failures, saying, “Everyone knows what happened before August. We are now working on institutional reforms to bring stability back to the sector.”
While board reshuffles and legal measures have helped reduce some of the pressure, experts argue that a lasting solution will require more than cosmetic changes. Without comprehensive regulatory reform, transparency in loan processing, and strict conflict-of-interest rules, the unchecked power of shareholder-directors could continue to threaten the integrity of the banking system.
With depositors’ trust hanging by a thread and the financial health of the country at stake, Bangladesh’s banking sector now stands at a crossroads. The coming months will determine whether authorities have the will-and the tools-to prevent a repeat of this economic abuse, or whether history is doomed to repeat itself.
