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There is nothing like being on top, if it is not for the wrong reason. But Bangladesh has indeed made it to the top as home to the worst loan defaulters in Asia.
A recent report of the international multilateral lending agency, Asian Development Bank (ADB), says Bangladesh has topped the list of countries with the banking sector burdened with non-performing loans. And the amount of non-performing loan, according to the report is 20 per cent of the total loan advanced by the country's banking system.
In fact, the problem started with the practice of rescheduling of defaulting big loans during the previous autocratic regime. The loan defaulters, often cronies of the political class in power, would influence bank officials to reschedule their loans.
Relaxation of the loan rescheduling, however, started immediately upon the previous autocratic regime's assumption of power in 2009 when the requirements of down payment were temporarily suspended and rescheduling was made available to all export oriented sectors. Though the step was taken ostensibly to promote export-oriented industries, the beneficiaries included the businesses, real or fake, having connections with the powers that be. The banks' loan rescheduling rules were further relaxed with 2012's Master Circular which allowed for up to three reschedulings along with extended payment terms. It actually gave a blank cheque to the delinquent borrowers who could enjoy multiple reschedulings against a single loan along with the extension of repayment periods for rescheduled loans. But those people were basically bank robbers and looters masquerading as bankers or entrepreneurs in the financial sector. So, one should not be surprised that as of September 5, 2025, the ratio of non-performing loans stood at 20.2 per cent of total loans, making it, again, the highest in Asia. This led to the rise in the amount of distressed assets in the banking sector at USD 20.27 billion marking a 28 per cent jump year-on-year. Interestingly, according to recent reports, close to 39 per cent of the rescheduled loans turned into default ones. This exposed the ineffectiveness of the banking tool called rescheduling that aimed to reduce the volume of non-performing loans. This came out from the central bank's financial stability report 2024, which showed that by the end of 2024, outstanding rescheduled loans stood at over Tk 3.48 trillion of which close to Tk. 856.8 billion was rescheduled in 2024. In fact, far from reducing the volume of default loans, rescheduling has thus far been used to mask the non-performing loans (NPLs) as well as delay the recognition of defaulted loans as NPLs. Obviously, the measure did not help resolve the issue of NPLs.
The volume of NPLs, for instance, rose from Tk.1.45 trillion in December 2023 to Tk.2.11 trillion by June 2024 and by December 2024, it stood at Tk.3.45 trillion.
In point of fact, the real picture regarding the health of the banking sector was kept under wraps during the autocratic regime. But following the political changeover, once the newly empowered central bank, Bangladesh Bank (BB), under its present governor began to expose actual condition of the banking sector's health, it became clear how sharp deterioration in loan quality had pushed many banks to aggressively reschedule loans so their balance sheets might look better before year-end. In fact, this process started in full swing since 2022 when banks got full authority to reschedule default loans without prior permission from the central bank. So, it was a no-holds-barred situation for the politically linked members on the board of the commercial banks to hollow out the banks with rescheduling, fresh borrowing and doing whatever they wanted with public money in the connivance with the central bank, or the government for that matter. So, is it any miracle that the fallout of it all is what is now in plain sight? We are now on top in Asia as a bank defaulter.