Originally posted in New Age on 8 October 2025
One in every five borrowers now loan defaulters
Bangladesh Bank has disclosed that nearly one in every five borrowers in the country’s financial sector has defaulted, which underscored the depth of the banking crisis and the erosion of credit discipline.
According to the central bank’s latest report, as of June 2025, there were 76.05 lakh borrowers in the financial system, of whom 14.09 lakh — or around 19 per cent — had become defaulters.
Economists said that this number is alarmingly high and reflects a systemic failure in governance, regulation, and borrower accountability.
In most countries, the share of defaulted borrowers is far smaller.
For instance, in India, less than 2 per cent of borrowers fall into default status; in Vietnam and Indonesia, the figure is below 3 per cent; even in fragile economies such as Sri Lanka or Pakistan, it remains under 7 per cent.
Bangladesh’s 19 per cent is therefore extraordinarily high and points to a deep-rooted behavioural and governance problem.
Economist Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, told New Age that the large number of defaulters exposes a long-standing culture of weak repayment ethics and lax supervision.
He said that politically connected large borrowers have misused their influence to take away huge amounts of money and repeatedly obtain loan rescheduling or write-offs without settling previous dues.
‘This practice has sent a clear message that repayment is optional,’ he said, adding that small and medium borrowers have increasingly followed the same pattern.
Mustafizur described the situation as the result of an ‘unholy nexus’ between borrowers and lenders that flourished under political patronage.
A toxic environment of impunity has been created in the financial sector, he said.
Bangladesh Bank must now rebuild its monitoring and control mechanisms, which had collapsed under the previous government, and ensure governance and accountability in commercial banks, he said.
Central bank data show that non-performing loans in the banking sector surged to nearly Tk 6 lakh crore by June 2025, up from Tk 4.20 lakh crore in March 2025 and Tk 3.45 lakh crore at the end of 2024.
The total outstanding loans stood at about Tk 20 lakh crore in June, meaning roughly 30 per cent of total lending is now stressed or at risk.
Experts said that a massive amount of NPLs surfaced after the central bank had begun revealing the actual financial condition of banks following the ouster of authoritarian Awami League regime under which politically connected large bank borrowers had enjoyed undue privileges and regulatory leniency.
They added that recent political unrest and prolonged economic stagnation have also made it difficult for many legitimate businesspeople to repay loans on time.
Officials noted that part of the increase stemmed from changes in loan classification rules.
The period before a loan is designated as default was reduced from 270 days to 180 days in September 2024, and then further to 90 days from April 2025 to align with international standards.
The central bank’s inspection department also reclassified several large loans as non-performing following on-site audits.
The escalation in defaults has been compounded by borrowers’ failure to renew revolving credit lines, delayed instalments under rescheduled loans, and the accumulation of interest on already stressed accounts.
