Ahammad Parvej Khan
Bangladesh’s banking sector is grappling with unprecedented systemic disruption, driven by the reckless granting of commercial bank licenses on political considerations and pervasive partisan influence over loan approvals during previous governments.
Increasing the number of banks was once hailed as a cornerstone of financial inclusion. Today, however, it has transformed into a critical economic vulnerability as non-performing loans (NPLs) hit historic highs.
According to the latest Bangladesh Bank data, total classified loans across the country surged to an alarming Tk 5.89 lakh crore at the end of March 2026, driving the sector-wide NPL ratio to a staggering 32.26 percent.
Data suggests that the currently the State-Owned Commercial Banks (6 SoCBs) Tk 1.50 lakh crore classified loan (45.85% NPL ratio), Private Commercial Banks: Tk 4.16 lakh crore (30.11% NPL ratio), Specialized Banks (3 SBs): Tk 19,200 crore (40.72% NPL ratio) and Foreign Commercial Banks (9 FCBs): Tk 3,263 crore (4.82% NPL ratio).
Deepening the crisis, central bank reports reveal that a massive 85 percent of these toxic defaults are concentrated in just 15 highly stressed lenders.
Industry experts point out that the financial rot accelerated significantly when regulators gave in to political pressure, continuously greenlighting new commercial banks despite local market saturation. Rather than fostering healthy competition, many of these newer entities turned into instruments for political patronage.
Prominent economist and Executive Director of the Centre for Policy Dialogue (CPD), Dr. Fahmida Khatun, noted in a recent study that systemic damage intensifies rapidly when governance deficits overlap with broader economic pressures. Analysts emphasize that granting licenses to individuals with strong political backing systematically compromised board oversight.
"Politically backed lending that completely circumvented central bank regulations, combined with preferential treatment for selected corporate conglomerates, has fundamentally broken the backbone of our financial ecosystem," a leading banking analyst stated, requesting anonymity. "We are looking at an artificial expansion of the market where banks were created not to mobilize savings, but to serve partisan business interests."
The immediate fallout of this structural failure is a severe liquidity crunch and a deep erosion of financial buffers. Central bank data reveals that the capital deficit across 23 state-owned and private commercial banks has blown up exponentially, driving the overall Capital to Risk-Weighted Assets Ratio (CRAR) into negative territory at -2.9 percent—far below the international safety baseline of 12.5 percent.
Private Shariah-based commercial banks, previously major liquidity drivers, are facing massive NPL backlogs. Islami Bank Bangladesh Limited recorded the highest volume of bad loans at Tk 95,629 crore (a 50.88 percent NPL ratio) following years of unchecked board control by a controversial political conglomerate. Similarly, First Security Islami Bank saw its NPL ratio skyrocket to a shocking 97.39 percent of its total loan portfolio, holding Tk 60,843 crore in default.
State-owned giants continue to buckle under the weight of bad debts approved under executive and political influence. Janata Bank leads the pack with a staggering default volume of Tk 74,996 crore (67.4% NPL ratio), while Agrani Bank and Rupali Bank are struggling to survive with NPL ratios of 40 percent and 43.37 percent, respectively.
Conventional private lenders have been hit equally hard. National Bank Limited reported bad loans of Tk 24,305 crore (57% NPL ratio), alongside massive capital deficits.
The unprecedented surge in defaults has restricted banks' ability to extend fresh credit to genuine small and medium enterprises (SMEs), suffocating private sector growth and driving overall credit growth to its lowest level in history.
Speaking to The Bangladesh Post, Economic Analyst and TIB Member Md Mazedul Hoque noted that political interference under successive governments has drawn widespread criticism.
"To restore good governance, central bank autonomy must be guaranteed, and the Bank Company Act requires immediate amendment. If the current administration is committed to reforming the sector, bank boards must be constituted strictly without political influence," Hoque said.
Analysts reiterate that without a complete structural overhaul—including isolating the central bank from political mandates, holding willful defaulters legally accountable, and enforcing a strict freeze on politically motivated loans—the recovery of Bangladesh’s banking ecosystem could take up to a decade.
