Default loan may exceed Tk 3.5 trillion

In the third quarter of 2024 (September), the amount of defaulted loans in banks surged by 73,586 crore BDT, reaching nearly 3 trillion BDT. Although the figures for the December quarter are yet to be calculated, financial experts predict that default loans may exceed 3.5 trillion BDT.

According to banking sector insiders, during Sheikh Hasina’s 15.5-year tenure, large-scale financial mismanagement took place under the guise of loans, and many loan records were concealed. As hidden information is now surfacing, defaulted loans increased by 73,586 crore BDT in September alone. If this trend continues, default loans exceeding 3.5 trillion BDT in December will not be surprising.

Sharp Increase in Defaulted Loans

A senior Bangladesh Bank official (on condition of anonymity) stated that in June 2024, default loans stood at 2.11 trillion BDT, but by September, they had jumped to nearly 3 trillion BDT. He remarked, "If this trend continues, default loans surpassing 3.5 trillion BDT would not be unexpected."

Bangladesh Bank's latest report reveals that out of 61 active banks, 48 recorded an increase in defaulted loans, while only 7 banks saw a decline in defaults.

According to Bangladesh Bank, by the end of September 2024, total default loans stood at 2.84 trillion BDT, which accounts for 17% of total disbursed loans. During this period, 8 banks saw their defaulted loans double or more, while 7 banks had more than 50% of their total loans classified as defaults.

Exposure of Banking Sector Irregularities

Since the Interim Government took office on August 8, 2024, corruption within the banking sector has been increasingly exposed. Prominent figures associated with financial mismanagement include S Alam Group, Salman F Rahman, and other high-profile business entities close to the previous Sheikh Hasina government.

Due to financial irregularities, 11 banks, including several controlled by S Alam Group, have had their board of directors restructured. Additionally, several banks have faced penalties, warnings, and other regulatory actions. Some bank directors and managing directors have fled the country, while new defaulted loan cases continue to emerge.

Bangladesh Bank reports that since Sheikh Hasina left the country, default loans in at least 48 banks have surged by 87,707 crore BDT. However, 7 banks have recorded a decline in defaults.

As of September 2024, total loans disbursed across all banks amounted to 16.83 trillion BDT, of which 16.93% are now classified as defaulted.

Which Banks Have the Highest Defaults?

The highest increase in defaulted loans was recorded by the state-owned Janata Bank, with a rise of 12,345 crore BDT. Other top contributors include three banks controlled by S Alam Group:

1. Union Bank → 11,172 crore BDT increase


2. First Security Islami Bank → 10,258 crore BDT increase


3. Islami Bank Bangladesh → 10,028 crore BDT increase

Other banks with significant increases include:

Agrani Bank → 5,567 crore BDT

Global Islami Bank (S Alam-controlled) → 3,490 crore BDT

Sonali Bank → 3,070 crore BDT

National Bank → 2,793 crore BDT

Rupali Bank → 2,272 crore BDT

Bank Asia → 2,180 crore BDT

State-Owned Banks Worst Affected

As of September 2024, default loans in state-owned banks amounted to 1.26 trillion BDT, representing 40.35% of total loans disbursed by these banks.

In contrast:

Private banks have 1.50 trillion BDT in defaults (11.88% of their total loans).

Foreign banks have 3,246 crore BDT in defaults (4.99% of their total loans).

Specialized banks have 5,814 crore BDT in defaults (13.21% of their total loans).

Banks With the Highest Growth in Defaulted Loans

Among the banks that witnessed the highest percentage increase in defaulted loans from June to September 2024:

First Security Islami Bank: 4.53% → 21.48%

Global Islami Bank: 2.36% → 26.92%

Union Bank: 3.92% → 43.92%

EXIM Bank: 3.66% → 6.91%

Islami Bank: 4.42% → 10.83%

Madhumati Bank: 1.97% → 4.87%

Al-Arafah Islami Bank: 6.47% → 10.17%

Even well-performing banks saw a sharp increase in defaults:

Bank Asia: 7.85% → 15.58%

Premier Bank: 5.79% → 9.86%

NRB Bank: 5.63% → 9.09%

NCC Bank: 5.72% → 6.93%

City Bank: 2.91% → 4.49%

Dutch-Bangla Bank: 391 crore BDT increase

Eastern Bank: 141 crore BDT increase

Banks With Over 50% of Loans in Default

As of September 2024, 7 banks have over half of their total disbursed loans classified as defaults:

1. BASIC Bank (State-owned)


2. Janata Bank (State-owned)


3. Bangladesh Commerce Bank (Private)


4. ICB Islami Bank (Private)


5. National Bank (Private)


6. Padma Bank (Private)


7. National Bank of Pakistan (Foreign)

Future Outlook: Default Loans to Rise Further

A top official from Bangladesh Bank warns that defaulted loans will continue to rise, as many rescheduled loans are turning into defaults, and legal stay orders on loans are expiring.

When the Awami League took power in 2009, total defaulted loans stood at 22,481 crore BDT. Since then:

2014 (Second Term) → 50,000 crore BDT

2018 (Third Term) → 93,911 crore BDT

December 2023 → 1.45 trillion BDT

June 2024 → 2.11 trillion BDT

September 2024 → 2.85 trillion BDT

How Can Bangladesh Recover?

Dr. Tawfiq Ahmed Chowdhury, former DG of Bangladesh Institute of Bank Management (BIBM), says,
"The main defaulters have laundered their money abroad. The government must intervene strictly to recover these loans. Only strong state action can curb rising defaults."

Final Figures of Default Increases in Key Banks

Al-Arafah Islami Bank → 1,795 crore BDT

EXIM Bank → 1,713 crore BDT

Premier Bank → 1,254 crore BDT

IFIC Bank → 633 crore BDT

Dhaka Bank → 552 crore BDT

Other banks affected include BDDBL, AB Bank, Community Bank, Jamuna Bank, Meghna Bank, Mercantile Bank, One Bank, Prime Bank, UCB, Uttara Bank, Pubali Bank, Shahjalal Islami Bank, and others.