STAR BUSINESS REPORT

Bangladesh’s banking sector is staring at a long climb out of its deepening bad-loan crisis, with Bangladesh Bank Governor Ahsan H Mansur warning yesterday that it may take five to ten years for soaring non-performing loans (NPLs) to return to safer territory, despite expectations that they will stabilise at the current level.

However, business leaders, already weighed down with high borrowing costs, want immediate actions to put a stop to the surge in toxic loans, saying they fear the NPLs will continue to rise, impacting investment.

According to the central bank, defaulted loans stood at Tk 6.44 lakh crore at the end of September this year, nearly 36 percent of total disbursed loans. Net NPLs also jumped to 26.4 percent, or Tk 4.15 lakh crore, as of September. A year earlier, bad loans accounted for 16.93 percent of outstanding loans.

“A default rate exceeding one-third of total loans poses a severe challenge. The true scale of bad loans is now becoming apparent due to stricter loan classification rules,” Mansur told business leaders at the Fourth Bangladesh Economic Conference 2025, organised by the Bonik Barta in Dhaka.

With banks effectively operating on only two-thirds of their asset quality intact, the governor described the crisis as a structural risk that cannot be resolved quickly.

“We expect NPLs to stabilise at this level. After that, a gradual decline may begin. But a full recovery will require five to ten years of sustained reform and discipline,” he said.

Business leaders, however, were sceptical about any stabilisation without a crackdown on serial defaulters.

“If the average NPL is around 35 percent, then where has this money gone? Strict action against defaulters is necessary,” said AK Azad, chairman of Ha-Meem Group.

With such a large share of loans outside the system, he said, “running the state will be impossible, and GDP will decline even further.”

The next government, he stressed, must identify the borrowers behind the bad loans and bring them under the law.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said they believe the NPLs may rise in the future.

“Steps must be taken to prevent any further increase. Industries should keep running so banks can get returns; if they get shut by dint of the law, banks get nothing,” he said.

Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry, echoed the concern. “When will this upward trend be checked, and when will it start moving in the right direction?”

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Industry representatives also pressed the central bank to ease monetary policy, arguing that high interest rates are choking investment at a time of already weakened demand.