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In 2024, the amount stood at Tk 85,679 crore, meaning loan rescheduling nearly doubled within a year, according to the report.

The overall picture emerging from the report is alarming, Mujeri said.

“A weak banking sector does not affect banks alone -- it has consequences for the entire economy,” he said, noting that banks play a central role in channelling credit to businesses and households.

If credit flows are disrupted, investment slows, production weakens and employment opportunities shrink, he added.

AKM Waresul Karim, dean of the School of Business and Economics at North South University, attributed the surge in distressed loans to regulatory failures, politically influenced lending and concentrated ownership.

The report also showed that asset quality across the banking sector deteriorated significantly in 2025, driven largely by a sharp increase in gross defaulted loans.

Bankers said businesses linked to the Awami League-led government, including S Alam Group, Nassa Group and Beximco Group, defaulted heavily following the government’s fall in 2024, adding to the sector’s bad loan burden.

However, several Bangladesh Bank reports suggested that a significant portion of the money had already been siphoned out of the country.

With distressed loans generating no income and recovery remaining weak, the capital base of many banks has slipped into negative territory.

“This is alarming and deeply concerning,” said Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank.

The current government assumed office at a difficult moment, and the severe stress in the financial sector has added to its challenges, said Rahman, also a former chairman of the Association of Bankers, Bangladesh.

“There appears to be no alternative to recapitalisation, but the government itself lacks the necessary funds,” he said, urging authorities to treat the issue with urgency.

The policy prescriptions needed to address the crisis are already well known, Mujeri said.

“What is needed now is political commitment, institutional capacity and urgency in implementation. Delaying action will only make the problems more complicated and more costly to resolve.”

Without decisive reforms, the banking sector is unlikely to recover and may continue to deteriorate, he warned.

He also cautioned that persistent public criticism of the financial sector is sending negative signals to the market and eroding depositor confidence.

“As a result, people are becoming increasingly reluctant to keep their money in banks,” he said.