As of mid-2025, the volume of non-performing loans (NPLs) has surged to an alarming Tk 4.2 lakh crore (USD 35 billion), up from Tk 3.45 lakh crore just six months earlier.
This now accounts for over 24% of total outstanding loans, a level that severely undermines financial stability, investors’ confidence, and the creditworthiness of the sector. These were told by Taskeen Ahmed, President of Dhaka Chamber of Commerce & Industry (DCCI), at a seminar on “Current Challenges in the Banking Sector: Borrowers` Perspective” organized by DCCI, today at the Chamber Auditorium in Motijheel.
Taskeen Ahmed also said this will create a crisis of confidence and capacity, stemming from poor governance, weak recovery mechanisms, and insufficient credit risk assessment. For the borrowers, this reality translates into a tight credit environment, higher collateral demands, and elevated interest rates, he added.
He also said that a coordinated policy response, linking monetary tools with fiscal strategies, is essential to restore confidence, stimulate credit flow, and enable business revival. He later proposed to allow a 6-month extension in the current loan classification timeline to enable businesses to carry out viable revival strategies without being labeled as defaulter.
Dr. Anisuzzaman Chowdhury, Special Assistant to the Chief Adviser, Economic Relations Division, Ministry of Finance, said that both the borrowers and the lenders of the financial sector have to be responsive. "We must protect the formal sector, otherwise the development of the informal sector will be hampered," he said. He also stressed the need for coordination between monetary and fiscal policy for the sake of overall macroeconomic stability. At the same time, he also underscored the importance of coordination and integration of policies for the reform of the financial sector. He said that even in the current situation, the banks in good condition can reduce the interest rate to some extent if they want, which will provide some relief to the borrowers, especially SME entrepreneurs.
Ashraf Ahmed, former president and current Director of Dhaka Chamber, presented the keynote paper at the event. He said the economy has faced several challenges in recent times, including devaluation of taka, rising US dollar exchange rate, supply deficit, import restrictions, high inflation, high interest rates, inadequate credit flow to the private sector, etc. Only because of inefficiency, we are paying a high price for energy while importing energy from the international market. Moreover, gas supply shortage in industries indicates a significant loss of growth opportunity, up to 50% of industrial output, although it was possible to double the production of goods if energy supply is available, he noted.
He also said that in 2025, the interest rate of loans will have increased from 9% to around 14% and for this, the private sector will have to pay taka 1.39 trillion as additional interest, he added. Ashraf Ahmed also said that due to the increasing default loans, the credit flow to the industries will go downward, which will lead to lower investment, and weaken the private sector. He also pointed out that the default loans of only 14 banks in the country are about 40%, while the remaining 47 banks that are performing well have only 5-7% defaulted loans, so this problem is not the problem of the overall banking sector alone. Ashraf Ahmed later said creditors should get the restructuring and rescheduling facilities under legal protection as a way of corporate revival. He also opined that there is no alternative to structural reforms in the banking management system to ensure good governance in the banking sector. For long-term financing, he later stressed on capital market reforms. Monetary tightening (from FY2022-2025) reduced import capacity by 31.8%, compared to FY 2022, due to constrained credit and persistent devaluation of the taka.
Dr. Md. Ezazul Islam, Executive Director, Monetary Policy Department, Bangladesh Bank, said that after 2014-15, a few banks have gone under the control of certain families, which has led to opacity and instability in the overall financial sector.
He said after the political changeover in July-August this year, the confidence of entrepreneurs and borrowers started to regain following the central bank’s move to stable forex reserve and market-based currency exchange rate. For this, the private sector will benefit at the end of the day. He said a number of policy reforms have been taken to deal with the current unstable situation in the financial sector, expressing hope that it will bring stability.
He also mentioned that, most banks are doing business very well, and if they want, they can reduce the interest rate a bit to give comfort to the borrowers, especially the SMEs, as well as they should come forward with social business. He further said that fixing the interest rate earlier was a mistake; rather, it should be determined by the market demand itself.
Hossain Khaled, Group Managing Director, Anwar Group of Industries and former President, DCCI, said that SMEs are our main driving force and one of the partners in the supply chain of large enterprises, so if large enterprises suffer, it will have an impact on SMEs in the backward linkage. It is true that due to political and global economic challenges, our economy has to face several setbacks, he opined. He also said that in terms of lending, we should come out of the traditional bank-client relationship to a bank-client partnership mindset. It will help the borrowers to have good guidance from the banks as well. He later added that the rising NPL leads to widen the gap between demand and supply that leads to increase production cost on the other hand. If this trend continues, employment generation will go down.
At the same time, he opined that the economy may shrink due to negative credit flow or negative equity, or a cash crunch.
Abdul Hai Sarker, Chairman, Bangladesh Association of Banks, said that due to weak policies of the government, the default loans are gradually increasing, and the rate of recovery of default loans is very slow. Also, due to a lack of Artharin Adalot or the number of courts, there is a long delay in the legal process to recover NPLs. He also opined that there is a need to enhance coordination between the government`s policymakers and implementing agencies to reduce default loans. Also, if the local borrowers do not feel comfortable regarding the overall lending situation, it will be very difficult to attract investment.
Fazle Shamim Ehsan, Executive President, BKMEA & Managing Director, Fatullah Apparels Limited, said that it is very unfortunate that good borrowers are often deprived of various facilities or incentives from the banks. He also said that due to the high exchange rate, banks are sometimes reluctant to increase the credit line. He also mentioned that the borrowers of comparatively weak banks are suffering due to their high NPL and bad relationship with the central bank.
Mati Ul Hasan, Managing Director, Mercantile Bank PLC, said that the banking sector itself has been the most affected sector in recent times. In order to give the banks a relief by recovering defaulted loans, he suggested forming asset management companies under the PPP initiative. This initiative would enable banks to recover a portion of their non-performing loans, a bit, he added. He also noted that due to an inadequate supply of gas to the industries, production is continuously being hampered. As a result, many entrepreneurs may become defaulters in the coming days. Therefore, he urged the government to take effective measures to address this issue and protect the private sector.
Sohana Rouf Chowdhury, Managing Director, Rangs Motors Limited, said that entrepreneurs are facing countless challenges due to instability in the financial sector. Moreover, the high interest rates in the manufacturing sector have made it increasingly difficult to sustain their business operations. Considering the current economic challenges, she emphasized the need to extend the repayment period of bank credit. She also expressed that if a low-cost fund could be allocated for local investors who are interested in manufacturing electric vehicles (EVs), it would be helpful to achieve the desired level of development in this sector.
DCCI Senior Vice President Razeev H Chowdhury and Vice President Md. Salem Sulaiman were also present on the occasion.
