Bangladesh’s banking sector may need five to ten years to return to stability due to the alarming rise in defaulted loans, Bangladesh Bank Governor Dr Ahsan H. Monsur warned on Saturday.
Speaking at the opening session of the 4th “Bangladesh Economic Conference 2025” at the Sonargaon Hotel in Dhaka, the governor said the scale of non-performing loans (NPLs) is now too large for a quick turnaround.
“More than one-third of all bank loans are in default. This is not a small problem,” he said. “Banks are surviving on the remaining loans, which has put the entire financial sector under severe pressure.”
He noted that NPLs continue to rise each quarter under the new classification rules. “Two years ago, it was estimated informally that NPLs might be around 25 percent, though official figures showed 8 percent. Now the actual rate has crossed 35 percent,” he said.
The governor added that foreign exchange reserves are sufficient for opening import LCs, and that LC openings ahead of Ramadan have already increased by 20 to 50 percent compared to last year.
Economists and business leaders at the conference pointed to weak governance, policy inconsistencies, and heavy tax burdens as growing concerns for the private sector.
BIDS Director General A K Enamul Haque said the country’s economic management is driven by a “catch-the-thief mindset,” which erodes business confidence. He criticized regulatory bodies for lacking accountability and said the tax administration still operates with a “zamindari mentality.”
Ha-Meem Group Chairman A K Azad described the macroeconomic situation as “worrying,” noting that high interest rates under tight monetary policy have slowed investment. Private-sector credit growth of just 6 percent has left industrialisation “almost stagnant,” he said.
BSMA President and GPH Group Chairman Jahangir Alam highlighted the rising costs of doing business, including duties on raw materials, advance income tax, and an increase in turnover tax from 0.1 percent to 1 percent. “Companies have to pay tax regardless of profit or loss, which is unheard of anywhere else,” he said.
City Bank Managing Director Mashrur Arefin said governance in the banking sector is improving, with loans now approved through proper procedures rather than informal boardroom decisions. He said businesses are currently cautious, but investment is expected to pick up after the national election.