Bangladesh now has world's highest default loan rate

The default loan situation in the country's banking sector has become increasingly alarming. Currently, nearly 33 out of every 100 taka disbursed by banks is in default. In terms of default loan ratio, Bangladesh now ranks highest globally, surpassing war-ravaged Ukraine which was previously at the top.

According to Bangladesh Bank data, the total amount of default loans in the banking sector stood at Tk 606,555 crore at the end of June 2026, representing 32.78 percent of total loans disbursed by banks . Just three months earlier, at the end of March, default loans amounted to Tk 588,704 crore, meaning default loans increased by Tk 17,851 crore in a single quarter.

Previously, in September 2025, default loans had reached a record Tk 644,515 crore. Industry insiders say not all of the recent large-scale default loans have been newly created. During the previous Awami League government's tenure, many problem loans were shown as regular through rescheduling, various special facilities and accounting changes. After the political transition, irregularities, fraud and benami loans began to surface through asset quality reviews and domestic and foreign audits of banks.

The five merged banks are in the most fragile position, with over 80 percent of their disbursed loans currently in default. Several other state-owned and private banks also have more than half of their total loans in default. Political influence in lending, fake and benami loans, weak banking supervision, economic downturn and energy crisis are considered among the reasons behind the rise in default loans.

To ease the pressure of default loans, Bangladesh Bank has already taken various reform measures. Loan classification and provisioning rules have been aligned with international standards . Alongside asset quality reviews of weak banks, boards of several banks have been reconstituted. A risk-based supervision system has been introduced. As a result of these measures, many risky loans that were previously shown as regular are now being identified as defaulted.

However, experts believe that even if the amount of default loans can be reduced on paper through write-offs or rescheduling, the problem will not be resolved unless actual recoveries are made. The International Monetary Fund (IMF) has also warned that stricter loan classification systems and asset quality reviews could lead to the identification of even more default loans in the future.