In Bangladesh, 9% of all bank loans are non-performing

The total amount of defaulted loans jumped 20.7 percent in a year

Bangladesh’s banks had disbursed a total of nearly Tk 16.18 trillion in loans by December 2023, of which nearly Tk 1.36 trillion – or 9 percent – were non-performing.

A non-performing loan, or NPL, is a bank loan subject to late repayment or is unlikely to be repaid by the borrower.

In December 2022, the total amount of NPLs stood at around Tk 1.21 trillion, according to Bangladesh Bank Executive Director and spokesman Mezbaul Haque.

This means total NPLs jumped by 20.7 percent year-on-year.

AT A GLANCE

• State-owned banks saw NPLs totalling Tk 657 billion, at a rate of 21 percent

• Private banks saw NPLs totalling nearly Tk 710 billion, at a rate of 5.93 percent

• Specialised banks saw NPLs totalling Tk 56.69 billion, at a rate of 13.87 percent

• Foreign banks saw NPLs totalling Tk 32 billion, at a rate of 4.82 percent

Though NPLs jumped year-on-year, the final quarter (from October to December) saw bad debts decrease by Tk 97.65 billion.

According to the central bank’s data, the total amount of NPLs had stood at Tk 1.55 trillion in September last year, accounting for 9.93 percent of total loans.

The decline in the amount in the final quarter was due to the provision of loan rescheduling facilities.

March 2019 was the first time Bangladesh’s NPLs crossed the Tk 1 trillion mark, reaching Tk 109 trillion.

In April 2020, when the interest rate on bank loans was fixed at 9 percent, then finance minister AHM Mustafa Kamal had told the media that the total amount of NPLs would not increase by another taka, saying that bank owners had given him their word.

He claimed that instead of continuing to rise, the total amount of NPLs would slowly fall.

Though the 9 percent interest rate was maintained until June 2023, the NPL amount continued to rise. In June 2023, it hit the highest level in the country’s history at Tk 1.56 trillion, 10.11 percent of all loans.

But economists believe that the total amount of NPLs would exceed Tk 2.5 trillion once it accounted for loan waivers, rescheduling, non-defaulting due to cases tied up in higher courts, and debt restructuring.

The International Monetary Fund, or IMF, has consistently objected to the data on defaulted loans published by Bangladesh Bank.

In June 2019, the international lender said that much of the data on Bangladesh’s actual NPLs was being hidden and could amount to around Tk 2.5 trillion.