Mirpur:Weak credit appraisal, governance deficiencies, and delayed recognition of bad loans are significant factors behind Bangladesh's ongoing non-performing loan (NPL) issues, as highlighted in a study by the Bangladesh Institute of Bank Management (BIBM).
According to Bangladesh Sangbad Sangstha, the study reported that the gross NPL ratio in Bangladesh's banking sector reached 33.2 percent as of June 2026. These findings were presented during a roundtable entitled "Default Loan in the Banking Sector in Bangladesh Policy Expectations and Market Realities" at the BIBM Auditorium. The event gathered researchers, academics, Bangladesh Bank officials, and senior bankers to discuss the causes of loan defaults and potential reforms.
BIBM Director General Dr. Md Ezazul Islam emphasized the need to address the high NPL ratio, which raises questions about credit appraisal and the independence of lending decisions. He noted the importance of post-disbursement monitoring and the effectiveness of loan restructuring and recovery efforts.
The study revealed that 68.8 percent of respondents believed cash-flow analysis was often compromised during credit appraisal, while 43.8 percent identified weaknesses in industry and sector risk analysis. It recommended a shift from collateral-based lending to cash-flow-led credit assessment to ensure loans are sanctioned based on borrowers' repayment capacity.
Post-disbursement monitoring weaknesses were also highlighted, including issues in obtaining reliable cash-flow data and verifying loan end-use. The study identified early-warning signals like overdue installments and unusual transactions as crucial for detecting potential loan defaults.
Delayed recognition of bad loans was another concern, with respondents citing provisioning burdens and management accountability as reasons for postponing problem loan recognition. Governance issues, including related-party lending and regulatory forbearance, were seen as major problems affecting lending discipline.
The study suggested that negotiation, restructuring, collateral realization, legal action, and alternative dispute resolution could aid loan recovery, depending on borrowers' financial viability. Gaps between policy expectations and banking practices were most apparent in loan approval and governance, followed by credit appraisal and loan rescheduling.
The roundtable featured a keynote paper by a research team from BIBM and Bangladesh Bank, with discussions led by prominent figures in the banking and academic sectors. Bangladesh Bank Deputy Governor Dr. Md. Kabir Ahmed attended as the chief guest, and Dr. Ezazul Islam chaired the session, delivering the concluding speech.