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As the government moves to merge five crisis-ridden Shariah-based banks into a single state-owned entity, one pertinent question arises as to whether the same recipe would be applied to state-owned financial institutions. The state-owned commercial banks as well as specialised banks have long been on life support, grappling with unacceptably high ratio of non-performing loans (NPLs) and massive capital shortfalls, forcing the government to repeatedly inject significant amounts of taxpayers' money to recapitalise those. The condition of Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB), both entrusted with promoting agricultural credit, is particularly dire.
BKB, established in 1973, was intended to ensure the financial inclusion of farmers, boost agricultural productivity, and safeguard food security. Today, half a century later, the bank teeters on the brink of collapse. Continuous losses, capital shortfalls, rising NPLs, administrative mismanagement, corruption, and political interference have transformed a beacon of hope for farmers into a burden on the state. This is not merely a crisis for one bank; it is a looming threat to the nation's economy and food security.
In 1986 RAKUB was formed by stripping the BKB of its branches in the Rajshahi region. The goal was to make local credit distribution more effective. But both banks now face rising losses and worsening capital shortfalls. Policymakers have long considered merging the two institutions, which could reduce administrative costs, unify loan management, and streamline services. However, bureaucratic inertia and indecision have stalled the process.
A recent report reveals that BKB has incurred a net loss of nearly Tk 191 billion in the past six financial years. As of June this year, its capital shortfall stands at Tk 292 billion (29,207 crore), while capital shortfall of RAKUB stands roughly at 25 billion.
Due to increasing losses and capital shortfall, both of the banks' operational capacities are reportedly steadily weakening, curtailing their ability to mobilise deposits and disburse loans, which is directly affecting farmers and small entrepreneurs. What aggravated the situation is recent policy change regarding NPL classification.
Reportedly, nonperforming loans of BKB surged from BDT 43.29 billion in June 2024 to BDT 175.38 billion by June 2025, driving the default rate up from 12.72 per cent to an alarming 49.44 per cent within a single year. Why this massive surge in NPL? Earlier, loans were classified as non-performing after six months, but under a new Bangladesh Bank guideline, introduced in line with IMF conditions, loans are now flagged after only three months. This condition clearly does not align with the ground reality. Agricultural loans, particularly for Boro paddy, cannot be expected to be repaid within such a short timeframe. As a result, thousands of farmers are being unfairly labelled as loan defaulters.
Seasonal agricultural production makes three-month repayment requirements unrealistic. The six-month period for classifying loans as non-performing must be restored, and rescheduling policies should provide concessions for farmers, ensuring temporary setbacks do not result in defaults. Agricultural banking requires policies tailored to its unique realities, not as per commercial banking rules.
Administrative instability and factionalism compound the crisis in the BKB. Reportedly, in one year alone, nearly 4,906 officers and staff were transferred, many multiple times. Allegations of bribes ranging from Tk 50,000 to Tk 500,000 for transfers or promotions are widespread. Powerful syndicates exert undue political influence to control transfer, promotion and recruitment trades. Prioritising party loyalty over professionalism and rampant transfer trading have shattered administrative discipline, with officials increasingly focused on political positioning rather than serving farmers.
Currently, banking sector reform is drawing significant attention from the interim government. Yet this vital bank cannot be left in such a sordid state. Its administrative discipline must also be restored. Transparent transfer and promotion policies are essential to end bribery and political interference. Competent leadership and politically neutral environment is a prerequisite for sound administrative governance
Bangladesh Krishi Bank is more than a financial institution; it is directly tied to agriculture and food security. Over half of the population relies on agriculture. If the bank remains weak due to internal crises, the consequences will reverberate across the economy. If the operations of BKB were expanded and strengthened, many farmers who are now falling prey to the vicious loan traps of microcredit schemes or rural loan sharks could be saved. So, streamlining and strengthening the bank's operation is urgent. The government, central bank, and policymakers must act swiftly. A forensic audit is needed to identify mismanagement, and the bank must be thoroughly restructured. Without decisive intervention, Bangladesh Krishi Bank will remain a liability to the state.
Since both BKB and RAKUB share the same objective and are in abject financial doldrums, a merger could offer a way out to reduce the number of loss-making entities. One specialised bank with solid financial base, sound governance and transparent loan disbursement could support farmers far more effectively and meaningfully contribute to agricultural growth.