MD MEHEDI HASAN

Distressed loans in the banking sector soared 44.3 percent year-on-year to a record Tk 10,91,848 crore in 2025, reflecting the sector’s deepening fragility.

Loans that are at a high risk of default, or where the borrower is already experiencing serious repayment difficulties, are termed distressed loans. These are calculated by combining defaulted loans, written-off loans, unclassified rescheduled loans, and loans under stay order.

As of December last year, distressed loans accounted for about 60 percent of total outstanding loans of Tk 18,20,915 crore.

“This means that nearly two-thirds of all loans are no longer performing normally,” said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development and a former chief economist of Bangladesh Bank.

Such a situation severely weakens the banking system and raises serious concerns about its ability to function effectively, he said.

According to Bangladesh Bank’s Financial Stability Report 2025, defaulted loans stood at Tk 5,57,217 crore, followed by unclassified rescheduled loans at Tk 2,68,733 crore, loans under stay orders at Tk 1,82,419 crore, and written-off loans at Tk 83,479 crore.

A written-off loan refers to a loan that a lender considers unlikely to be recovered and thus removes it from active accounts as a loss.

Rescheduled loans increased 28.24 percent year-on-year, with Tk 1,78,164 crore of those loans turning bad.

Last year, banks rescheduled Tk 1,70,503 crore in defaulted loans under the central bank’s special loan rescheduling policy, which offered easier terms and conditions.

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