Non-performing loans (NPLs) have become a major headache for Bangladesh’s banking sector, with recovery efforts significantly hampered by legal complexities, prolonged proceedings, and stay orders. Despite filing thousands of cases in the courts, banks are seeing minimal success in reclaiming their dues, leaving the sector vulnerable and affecting the overall economy.
According to a report by the Legal Division of Bangladesh Bank, as of June 2025, the total number of ongoing loan recovery cases in the courts reached 222,341, involving a staggering 4,07,435 crore Taka. By comparison, in March 2025, there were 219,633 cases amounting to 3,20,761 crore Taka. The report was presented at a bankers’ meeting organized by Bangladesh Bank on Sunday, where Governor Ahsan H. Mansur instructed banks to expedite the resolution of pending cases to improve loan recovery.
“The growing pile-up of cases is a clear signal that the pressure of NPL recovery is increasing,” said Shoukat Aziz, a banking analyst. “However, the low resolution rate is creating liquidity shortages, capital inadequacy, and financial instability in many banks. Unless legal processes are expedited, the financial foundations of banks may weaken further.”
Legal Bottlenecks Hampering Recovery: The core problem lies in the slow pace of case resolution and the steady inflow of new cases. Various forms of financial misconduct and fraud have left banks struggling to recover loans through conventional means. Even after repeated concessions and negotiations, defaulters often fail to repay. Legal constraints mean that while banks can file suits under the Money Loan Courts Act, 2003, the success rate remains very low.
“The legal system is simply not moving at the pace required to tackle the scale of bad loans in our banking sector,” said Dr. Anwar Hossain, senior economist at a Dhaka-based research institute. “Lengthy judicial procedures, lack of judges in specialized courts, and procedural delays are major hurdles. On top of that, stay orders issued by higher courts often freeze proceedings for years.”
Recent Recovery Statistics: Data from Bangladesh Bank shows that during April-June 2025, 11,944 cases were settled, resulting in the recovery of only 2,910 crore Taka. In contrast, banks filed 14,652 new cases during the same period, corresponding to 96,904 crore Taka in disputed loans. For comparison, in the previous quarter (January-March 2025), 10,064 cases were resolved, with recoveries amounting to 1,833 crore Taka.
“The disparity between cases filed and cases resolved is alarming,” said Shoukat Aziz. “It demonstrates that banks are continually adding to their legal backlog without making significant progress in actual recovery.”
Strategic Measures by Bangladesh Bank: As part of its strategic plan, Bangladesh Bank’s Legal Division has been monitoring loan recovery cases closely since December 2021. Banks and financial institutions have been receiving regular guidance, advice, and support to expedite the resolution of pending cases. Observations and progress reports are presented at quarterly bankers’ meetings.
Governor Ahsan H. Mansur emphasized that banks must actively challenge stay orders and pursue quick hearings in the High Court or through Civil Miscellaneous Petitions (CMP) to annul orders that block recovery. Banks have also been instructed to strengthen their legal teams, appoint competent officers and panel lawyers, and evaluate their performance annually to ensure accountability and effectiveness.
Expert Viewpoints on Legal Interventions: “Strengthening the legal capacity of banks is critical,” said Dr. Anwar Hossain. “A robust legal team can push pending cases forward, challenge unnecessary stay orders, and ensure that defaulters are held accountable. Without this, banks remain trapped in a cycle of uncollected loans, affecting capital adequacy and lending capacity.”
Shoukat Aziz added, “Expedited case resolution not only recovers funds but also restores confidence among depositors and investors. If banks cannot collect their dues, the systemic risk increases, potentially threatening broader financial stability.”
Challenges in the Court System: Several factors contribute to delays in loan recovery cases. A shortage of specialized money loan courts and judges, inadequate preparation by bank lawyers, delayed hearings, and complex legal requirements all slow the process. Moreover, defaulters often obtain stay orders from higher courts, halting proceedings indefinitely.
“Many cases hang for years because of these stay orders,” explained a senior official at Bangladesh Bank’s Legal Division. “However, if banks act swiftly to challenge these orders, many can be lifted, allowing recovery to proceed.”
Looking Ahead: A Two-Pronged Approach: Experts argue that controlling NPLs requires coordinated efforts between banks, their legal teams, and the judiciary. Enhancing legal capacity, expediting court proceedings, and strictly enforcing recovery mechanisms are essential.
“The problem of non-performing loans is not just a banking issue; it has far-reaching economic implications,” Dr. Anwar Hossain noted. “Unchecked NPLs reduce banks’ lending capacity, slow economic activity, and could negatively impact GDP growth. Resolving these cases efficiently is critical for the country’s financial stability.”
Bangladesh Bank’s measures aim to restore efficiency in the loan recovery process and reinforce banks’ financial health. By resolving pending cases and reducing the backlog, banks can improve liquidity, strengthen capital bases, and regain public trust.
“Ultimately, the quicker we can resolve these legal bottlenecks, the sooner banks can return to normal operations, provide new loans, and support economic growth,” Shoukat Aziz emphasized.
With over 4 lakh crore Taka stuck in pending cases, Bangladesh’s banks face an uphill battle in managing non-performing loans. Legal hurdles, prolonged procedures, and stay orders continue to block effective recovery. The central bank’s push for stronger legal teams, regular monitoring, and active court interventions offers a path forward. However, success will depend on sustained efforts, judicial cooperation, and accountability within banks. Ensuring timely resolution of pending cases is not just a banking priority but a key element in safeguarding Bangladesh’s economic stability.
