Govt tightens measures against loan defaulters, says finance minister

Finance Minister Amir Khosru Mahmud Chowdhury on Tuesday said the government has intensified banking-sector reforms, strengthened deposit protection and tightened measures against loan defaulters in an effort to restore public confidence and improve financial stability.

Responding to a question from Cox’s Bazar-3 lawmaker Lutfur Rahman in the Jatiya Sangsad, the minister said the reforms are being implemented under a comprehensive bank-resolution framework established through the Bank Resolution Act 2026.

He said the framework was first introduced through the Bank Resolution Ordinance 2025 and operationalised under the Bank Resolution Scheme 2025 before being enacted into law this year.

As part of the resolution process, five troubled Islamic banks have been merged to form Sommilito Islami Bank PLC, a key step aimed at strengthening the banking system and addressing long-standing weaknesses in the sector.

The minister said depositor protection has also been expanded under the Deposit Protection Act 2026, with the maximum protected deposit amount doubled to Tk 200,000 from Tk 100,000.

In a significant policy shift, depositors of non-bank financial institutions (NBFIs), who were previously outside the safety net, have also been brought under the protection framework.

 “A clear legal framework, transparent resolution mechanisms and stronger depositor safeguards will play an effective role in rebuilding confidence among depositors and stakeholders,” Mr Chowdhury told the House.

The finance minister said the government and Bangladesh Bank have simultaneously stepped up efforts to recover defaulted loans and curb the accumulation of non-performing loans (NPLs).

The measures include policy support for recovering overdue loans, special resolution strategies for banks burdened with high levels of classified loans and stricter action against wilful defaulters.

Banks have been instructed to strengthen their legal divisions and recover at least one per cent of outstanding defaulted loans in cash through alternative dispute resolution mechanisms by June 30, he said.

Bangladesh Bank has also updated credit-risk management guidelines, while the recovery progress of the top 20 defaulters is being reviewed regularly at bankers’ meetings.

Banks with classified loans exceeding 10 per cent of their portfolios have been directed to form dedicated recovery-monitoring teams.

To strengthen credit discipline, the central bank is implementing Expected Credit Loss (ECL)-based loan classification and provisioning under IFRS 9, a move aimed at improving governance and reducing lending risks.

The minister said licensed collateral valuation firms have also been authorised to independently assess pledged assets alongside banks’ own valuations.

Mr Chowdhury said the government’s broader reform agenda includes updating agricultural loan-rescheduling policies, publishing lists of defaulters and wilful defaulters, revising incentives for regular borrowers and setting sector-wide borrowing limits for individual clients.

Legal reforms are also being pursued to impose tougher penalties on habitual defaulters, he added.

The government is considering including experienced bankers on the jury board of the Artha Rin Adalat and introducing measures to prevent defaulters from delaying recovery proceedings through writ petitions.

The minister said large companies seeking financing above Tk 10 billion would be encouraged to raise funds through bond issuances instead of relying heavily on bank borrowing, helping ease pressure on the banking system.

He also disclosed that legislation is being prepared to facilitate the establishment of private-sector asset management companies (AMCs) to help resolve distressed assets and strengthen long-term financial-sector stability.

newsmanjasi@gmail.com