Dhaka: The ratio of non-performing loans (NPLs) in Bangladesh's banking sector declined by nearly three percentage points over the past nine months amid banking-sector reforms and intensified loan recovery efforts. The NPL ratio fell to 32.78 percent in June 2026 from 35.73 percent in September 2025, according to Bangladesh Bank data.
According to Bangladesh Sangbad Sangstha, the data showed that the NPL ratio declined by 2.95 percentage points during the nine-month period. However, the total volume of defaulted loans remains high. At the end of June, classified loans stood at Tk 606,555 crore, accounting for 32.78 percent of total loans in the banking sector.
Banking-sector experts said the improvement in the NPL ratio came amid efforts to identify long-standing irregularities and previously concealed defaulted loans and clean up banks' balance sheets. As a result, while there has been some relief in the NPL ratio, the actual condition of the banking sector has also become clearer than before.
Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan told BSS that after August 5, 2024, the central bank placed emphasis on presenting the actual picture of the banking sector. As a result, the actual condition of many loans that had previously remained concealed or were hidden through rescheduling came to light, he added.
He said various measures have been taken to reduce defaulted loans, including a one-time exit policy and loan rescheduling for a maximum period of 15 years. He expressed the hope that the NPL ratio would decline further once the benefits of these measures are fully reflected.
According to Bangladesh Bank data, classified loans stood at Tk 604,515 crore at the end of September 2025, accounting for 35.73 percent of total loans. Although the volume of classified loans increased slightly to Tk 606,555 crore in June this year, its ratio to total loans declined.
Distinguished Fellow of the Centre for Policy Dialogue (CPD) Professor Dr Mustafizur Rahman said the NPL figures published during the Awami League government did not fully reflect the actual condition of the banking sector. 'While defaulted loans stood at around Tk 22,000 crore in 2008, the officially reported figure rose to around Tk 2 lakh crore in 2024. However, the White Paper estimated the actual volume of defaulted and distressed loans at around Tk 6.5 lakh crore,' he added.
Welcoming Bangladesh Bank's reform initiatives, he said there was no alternative to such reforms for overcoming the banking-sector crisis and restoring investment. At the same time, he stressed the need to increase domestic resource mobilisation and reduce defaulted loans.
Experts said although the current trend of declining NPLs is encouraging, it cannot yet be viewed as a final success. This is because the NPL ratio may initially rise as the process of identifying actual defaulted loans progresses. However, ensuring transparency in banks' accounts and disclosing their actual condition is the first requirement for sustainable reform.
South Bangla Agriculture and Commerce Bank Additional Managing Director Abdul Quaium Chowdhury said the process of cleaning up banks' accounts could create some pressure in the short term. 'However, it would help build a stronger and more stable banking system in the long run,' he added. For this, he said, professional management, proper loan assessment and an effective loan recovery mechanism must be ensured.
The central bank has also strengthened the reform framework for troubled banks. Besides, experts believe that the introduction of expected credit loss (ECL) accounting under International Financial Reporting Standard IFRS 9 will create greater scope for identifying potential credit risks at an early stage.
They said the focus should now be not only on reducing reported defaulted loans but also on addressing their structural causes. Strengthening loan recovery, establishing good governance, conducting strict due diligence in lending and taking effective legal action against willful defaulters are essential.
Professor Mustafizur Rahman said the present government inherited a banking system burdened with a large volume of defaulted loans and weak confidence. Therefore, he mentioned, recovery of defaulted loans and siphoned-off funds, effective enforcement of law and ensuring banking operations free from political influence are necessary.
Experts said the decline in the NPL ratio over the past nine months is a positive initial signal in banking-sector reforms. However, data for December 2026 will be important to assess how sustainable the progress has been. If continued reforms, loan recovery and good governance are ensured, defaulted loans may decline further while depositor confidence and credit discipline in the banking sector may also be restored.