Higher NPLs a key concern: ICCB

The International Chamber of Commerce-Bangladesh (ICCB) has pinpointed persistently high level of non-performing loans (NPLs) as one of the 'most serious structural concerns' in the financial sector of Bangladesh.

The chamber in its editorial published in the October-December 2025 Quarterly News Bulletin also warns that the volume of NPLs, now exceeding Tk 6.44 trillion, or around 35.7 per cent of total outstanding loans, poses a serious threat to banks, depositors and overall macroeconomic stability.

The country's banking system continues to serve as the backbone of Bangladesh's economic journey, mobilising national savings, channelling investment, financing trade, supporting entrepreneurship and underpinning employment generation, it mentioned.

As the country moves towards upper-middle-income status, the editorial stressed that the strength, credibility and resilience of the banking sector-- and the effectiveness of Bangladesh Bank as its regulator--will increasingly determine the sustainability of growth and the economy's ability to withstand future shocks.

Describing the scale of NPLs as 'alarming by international standards, the ICC, Bangladesh has cautioned that excessive bad loans weaken bank balance sheets, create capital shortfalls, reduce lending capacity, increase borrowing costs and discourage new investment.

Over time, the pressures can translate into heightened risks for depositors and undermine confidence in the financial system as a whole, it stated.

The editorial, however, acknowledged recent regulatory steps that have compelled banks to more accurately recognise and report defaulted loans.

While these measures have exposed long-standing weaknesses, the ICC Bangladesh emphasised that financial discipline, sound risk management and strong governance are indispensable for restoring the long-term health of the banking sector.

At the same time, it highlighted the importance of distinguishing between wilful default and genuine business distress, so that viable enterprises can receive structured support while deliberate financial misconduct is addressed firmly and transparently.

Drawing on global experience, the editorial underlined that strong, professional and independent central banks are essential to safeguarding financial stability.

Bangladesh Bank's role extends beyond monetary policy to prudential regulation, crisis management, payment system oversight and maintaining confidence in the financial sector.

According to the editorial, when the central bank operates freely, fairly and professionally, it becomes easier for the economy to manage financial pressures, maintain stability and attract investment.

It also reviewed Bangladesh Bank's actions over the past two years, noting that extraordinary measures-including liquidity support, guarantees and refinancing facilities--were taken to preserve stability during periods of financial stress and protect depositors' interests.

While such interventions reflect responsible central banking in times of volatility, the ICC Bangladesh cautioned that emergency support cannot substitute for strong governance, prudent lending and effective supervision.

A major recent development highlighted in the editorial is the Bank Resolution Ordinance 2025, which introduced a structured framework for dealing with distressed financial institutions.

Under this framework, five Shariah-based banks were consolidated into a single state-owned entity to safeguard depositors and contain systemic risk--the largest such intervention in Bangladesh's financial history.

However, the bulletin said experts have raised concerns that mergers involving publicly listed companies require shareholder approval under the Companies Act.

While consolidation can help reduce contagion risk and facilitate restructuring, the Chamber stressed that its long-term success would depend on accountability, improved governance, modern risk-management standards and strong regulatory oversight.

The editorial concluded that Bangladesh stands at a critical inflection point.

To support export diversification, CMSME growth, technological innovation, climate-resilient investment and infrastructure development, the country needs a strong and autonomous central bank, strict action against wilful defaulters, improved bank governance and transparency, globally aligned risk and compliance standards, responsible lending and continuous regulatory capacity-building.

"The objective is not merely to avoid a crisis, but to build a financial system that commands trust--both domestically and internationally--and supports sustainable economic transformation," the bulletin said in its editorial.

The ICC Bangladesh reaffirmed its commitment to working constructively with regulators, policymakers, banks and the wider business community to ensure that Bangladesh's financial system remains stable, credible and globally respected in the years ahead, according to Ataur Rahman, Secretary General of ICC Bangladesh.

bdsmile@gmail.com