The country's non-performing loan (NPL) crisis is assuming alarming proportions, with nearly 33 out of every 100 taka disbursed by banks now classified as defaulted.

The situation is so severe that Bangladesh has climbed to the top spot globally in terms of the default loan rate, leaving behind even war-torn Ukraine.

Previously, Ukraine held the title of the country with the highest rate of defaulted loans globally. However, Ukraine rapidly reduced this rate by writing off old bad loans, recovering debts, and expanding high-quality new lending.

The scenario in Bangladesh is the exact opposite; the true picture has emerged only because previously concealed irregular and anonymous loans are now being properly identified as defaulted.

According to Bangladesh Bank data, defaulted loans in the country's banking sector rose to BDT 6,06,555 crore at the end of June 2026, accounting for 32.78 percent of total disbursed loans.

At the end of March 2026, the amount of defaulted loans stood at BDT 5,88,704 crore, surging by BDT 17,851 crore in just the subsequent three months. Earlier, in September 2025, non-performing loans had hit a record BDT 6,44,515 crore.

Industry insiders note that this massive volume of bad loans did not emerge overnight.

During the prolonged tenure of the previous Awami League government, many distressed loans were artificially kept regular over long periods through loan rescheduling, special exemptions, and accounting adjustments.

Following political changes, asset quality reviews by banks and audits by domestic and international firms exposed the true extent of irregularities, forgeries, and anonymous loans.

As a result, massive amounts of previously hidden credit have now turned into defaults.

The five merged banks are in the worst condition, with over 80 percent of their disbursed loans classified as defaulted.

Beyond these, several other public and private banks have more than half of their loans stuck as defaults.

Fake and anonymous loans issued under political influence, weak oversight, economic sluggishness, and an energy crisis have played major roles in driving up these figures.

To curb this high rate of default, Bangladesh Bank has initiated various measures, bringing loan classification and provisioning rules into alignment with international standards.

Additionally, the asset quality of weak banks is being reviewed, the boards of directors of several banks have been reconstituted, and risk-based supervision has been introduced.

Due to these steps, many distressed loans previously masked as regular are now being identified as defaulted.

At the same time, various concessions are being offered to loan defaulters to ease the situation.

Although writing off or rescheduling loans may reduce default figures on paper, it does not actually recover the owed money. The IMF has also warned that stricter classification policies and asset quality reviews could unearth even more non-performing loans.

Experts emphasize that to achieve tangible results, authorities must seize assets and recover funds from willful defaulters, expedite lawsuit resolutions, halt political influence in bank management and loan approvals, and prevent the creation of new bad loans.

If these actions are implemented consistently, default rates could decline in the medium term.

However, a return to indiscriminate loan rescheduling and special favors will only temporarily lower the rate without solving the core problems of the banking sector.