Bangladesh’s banking sector faced a significant surge in bad debts following the political transition on August 5, 2024. By the end of September, bad loans reached a record Tk 284,977 crore, marking a staggering 34.8% rise in just three months and an 83.4% increase year-on-year, according to Bangladesh Bank data. High-profile defaulters, including major conglomerates, contributed heavily to the crisis, with one state-owned bank reporting Tk 19,000 crore of bad loans from a single borrower during this period. As a result, the banking sector’s bad debts accounted for 16.9% of the total disbursed loans of Tk 1,682,821 crore.
The Bangladesh Bank attributed part of the increase to a new loan classification method adopted in mid-August, reducing the grace period for term loans to three months. Experts highlighted broader challenges like foreign exchange shortages, high inflation, and reduced production, emphasizing the need for stronger legal frameworks and transparent reporting to address the growing default crisis.
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