Bangladesh’s banking sector is now grappling with one of the worst crises in its history, with nearly 89% of all disbursed loans classified as “risky” following years of political interference, widespread looting, and poor governance during the Awami League regime.
According to an updated Bangladesh Bank report, the country’s total banking assets stand at Tk 27 lakh crore, of which Tk 25.58 lakh crore are now considered risky or impaired assets-equivalent to 94.75% of total assets. Out of Tk 17.80 lakh crore in disbursed loans, Tk 15.80 lakh crore have fallen into the risky category, representing 88.76% of all outstanding loans.
Experts and financial analysts warn that such levels of distressed assets reflect systemic collapse, stemming from years of political control, corruption, and regulatory failure that allowed politically connected groups to plunder depositors’ funds with impunity.
Massive Financial Erosion in the Banking Sector: The report reveals that the sector’s financial health has deteriorated alarmingly in recent years. During the early years of the previous government, risky loans and assets were below 50% of total holdings. But rampant mismanagement and large-scale loan fraud have since pushed that figure to nearly double.
Most of these risky assets are loans disbursed without proper collateral, many obtained through forged documents or political influence. As the central bank report notes, “a large portion of loans was sanctioned through fraudulent means, and many remain uncollectable,” triggering deep concerns about the sector’s stability.
The report further cautions that if defaulted loans continue to rise, provision shortfalls will worsen, forcing banks into capital crises. This would further increase the share of risky assets, weakening the entire financial system.
True Picture May Be Worse Than Official Data: Sources inside Bangladesh Bank told The Daily Industry that the actual volume of risky assets may be even higher than reported, since the central bank’s data depend on figures provided by banks themselves - many of which underreport their non-performing loans (NPLs). “Many cases of fraud and forgery remain undisclosed,” one senior official said on condition of anonymity. “Several loans have no collateral at all, while others are backed by fake or inflated assets. If proper verification is conducted, the real figure of risky assets could rise significantly.”
The official also noted that some foreign loans remain off the books, hidden by both banks and borrowers. “These loans include a considerable amount of defaults. In addition, several banks have made politically motivated investments in corporate bonds and shares that are now worthless.” Among the risky investments identified are IFIC Bank bonds, Beximco Group shares, and Padma Bank deposits, much of which have now turned into non-recoverable assets.
Risky Assets Soar to 95% of Total Holdings: According to the central bank’s latest figures, by March 2025, total banking assets reached Tk 27 lakh crore, with Tk 25.58 lakh crore classified as risky - 94.75% of the total. Of the Tk 17.80 lakh crore in distributed loans - the core asset class for banks - Tk 15.80 lakh crore are now at risk. The causes are multifold: inadequate collateral, non-repayment past due dates, and lack of provisioning against bad loans. Many of these loans have transitioned from substandard to bad and loss categories, with no realistic prospect of recovery.
“Banks no longer have sufficient capital or profits to create provisions against bad loans,” said a senior economist at the Bangladesh Institute of Bank Management (BIBM). “Most are now operating at a loss, and that has created a provision shortfall of nearly Tk 2 lakh crore, which could expand further by year-end.”
Declining Profitability and Rising Capital Shortfall: Once, strong earnings helped banks offset rising NPLs by increasing provisions and capital buffers. But today, most banks are struggling with declining income and mounting losses.
Due to poor loan recovery and weak management, “the average bank now operates without surplus funds,” said the economist. “That means they can’t allocate fresh capital to cover new risks. This spiral of low income, high defaults, and rising provisions is pushing the system toward insolvency.” Bangladesh Bank data show that loan risk increased from 88.22% in March 2024 to 88.76% in March 2025, marking a 0.53 percentage point jump in one year. In 2023, the figure was 88.18%, while in 2022 it stood at 88.10%, and 87.60% in 2021 - showing a steady upward trend over four consecutive years.
Political Capture and Systemic Looting: The ongoing crisis has deep roots in political interference and the capture of financial institutions during the Awami League’s long rule. The report notes that the looting spree began in 2017, when the process of political control over banks intensified.
Since then, depositors’ money has been systematically siphoned off through shell companies, fake identities, and inflated loan schemes. Much of this money was then laundered abroad, leaving behind mountains of bad debt.
“By 2016, the total banking assets were Tk 11.13 lakh crore, of which risky assets amounted to Tk 7.44 lakh crore - about 67%,” the report notes. “By contrast, risky loans now account for nearly 89% of all credit - showing how deep the rot has spread in less than a decade.”
The total loan portfolio in 2016 was Tk 8.80 lakh crore, with Tk 6.47 lakh crore classified as risky. Today, the figure has more than doubled, both in nominal and percentage terms. Economists say this is the result of a deliberate collapse of governance, where politically connected business groups gained control over banks, undermining central bank oversight and exploiting regulatory forbearance.
Experts Warn of “Full-Blown Banking Collapse”: Speaking to The Daily Industry, former central bank officials and economists warned that if urgent reforms are not undertaken, Bangladesh’s banking sector could face a systemic collapse.
Dr. Zaid Bakht, former chairman of Agrani Bank, said, “When over 85% of loans are risky, it means the sector is functionally insolvent. The government and Bangladesh Bank must act swiftly to restructure banks, recover stolen funds, and restore governance.”
He added that political impunity remains the greatest obstacle to reform. “As long as those responsible for the looting remain unaccountable, no amount of policy will fix this mess.” Similarly, economist Dr. Ahsan H. Mansur, Executive Director of the Policy Research Institute (PRI), noted that “Bangladesh’s banking crisis is no longer about liquidity - it’s a crisis of confidence and integrity. Depositors have lost trust, and that’s the most dangerous sign for any financial system.”
A Decade of Decline: The report further highlights that while risky loans have fluctuated over time, the overall trend has been upward since 2021, worsened by the COVID-19 pandemic, when many borrowers lost repayment capacity. In March 2020, risky loans stood at 88.30%, slightly lower than today’s figure, despite the pandemic-era slowdown.
“The fact that the ratio is now higher than during COVID shows that the crisis is structural, not cyclical,” said a senior banker from a leading private bank. “It’s not just about temporary losses - it’s about deep-rooted corruption, regulatory capture, and weak enforcement.”
The Road Ahead: Reforms or Ruin: With the new government pledging to clean up the financial sector, expectations are high for decisive actions - but experts warn that the magnitude of losses could take years, if not decades, to recover.
According to The Daily Industry’s editorial analysis, “the sheer size of risky loans - nearing Tk 16 lakh crore - shows that Bangladesh’s banking crisis is not an isolated issue, but a reflection of long-standing political and institutional decay.”
Economists call for a comprehensive restructuring plan, involving: Strict loan classification and recovery drives, A forensic audit of politically linked loan portfolios, Accountability for past financial crimes, and Restoration of central bank autonomy. Without these measures, the report warns, the banking sector will continue to hemorrhage, deepening the ongoing confidence and liquidity crisis and threatening overall macroeconomic stability.
