Bangladesh has the second-highest non-performing loan (NPL) ratio among South Asian countries, with only Sri Lanka ahead, according to a recent report by the World Bank. The ratio of NPL in non-bank financial institutions (NBFIs) is the highest in Bangladesh, with Sri Lanka in second place.
The latest NPL ratios remain below the 10% threshold commonly used to indicate systemic stress in most South Asian countries, but are above the 2021 levels in Bangladesh and Sri Lanka. The report highlights that the asset quality has deteriorated in these countries, with default loans at banks of Bangladesh increasing by 16.8% year-on-year. The report also notes that high inflation, slow recovery of sectors affected by adverse shocks, and weak regulatory enforcement have contributed to the rise in the NPL ratio in Bangladesh. Deposits at banks have declined in most countries, including Bangladesh and Bhutan, due to high inflation and a slowdown in remittance growth.
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