The volume of non-performing loans (NPLs) in Bangladesh’s banking sector surged to a staggering Tk 2.85 lakh crore In September.

This spike followed the implementation of stricter regulatory practices, a reduction in data manipulation, and the adoption of international standards for NPL classification.

Data from Bangladesh Bank revealed that NPLs increased by more than Tk 1 lakh crore, rising to Tk 2,84,977 crore in September from Tk 1,82,295 crore at the end of March.

Around 17 per cent of total bank loans—amounting to Tk 16.82 lakh crore—are classified as non-performing, marking the highest ratio in South Asia.

Bankers explained that under the Awami League-led government, substantial sums were borrowed from banks under fake or fictitious names, and these loans are now emerging as defaults. Previously, these loans were reported as ‘regular’ through data manipulation and lenient policies, which included frequent loan rescheduling.

During the Awami League’s tenure, a series of policies were introduced to artificially lower default figures, with preferential treatment given to influential borrowers.

Following the ousting of the Awami League government on August 5, in a student-led uprising, the true extent of the irregularities began to surface as Bangladesh Bank moved away from these policies. Additionally, several businesses linked to the former government either ceased operations or went into hiding, resulting in missed loan repayments.

The NPL figure stood at Tk 2,11,391 crore at the end of June this year, Tk 1,45,633 crore in December 2023, and Tk 1,55,398 crore in September 2023.

Over the past 15 years, since the Awami League came to power in 2009, the NPL figure has ballooned by Tk 2,62,737 crore, up from Tk 22,240 crore. This sharp rise is attributed to regulatory leniency, undue privileges extended to large borrowers, and a lack of enforcement against defaulters.

Bangladesh Bank spokesperson and executive director Husne Ara Shikha said that the sharp increase in defaults reflects the central bank’s shift towards international standards in NPL calculation.

Previously, overdue loans were classified as non-performing after six months. From the September quarter onwards, this period has been reduced to three months, she said.