Bangladesh’s banking sector is grappling with a rising crisis of defaulted loans, particularly in the industrial and business sectors, which account for 66% of all defaults. The Financial Stability Report 2023 reveals that over 54% of defaulted loans are linked to manufacturing, especially textiles and apparel.
As of December 2023, total distributed loans reached approximately BDT 14.96 trillion, with defaults at BDT 1.34 trillion, or 8.94% of the total. Key issues include non-compliance with lending regulations, the influence of politically connected borrowers, and increased production costs stemming from the COVID-19 pandemic. Experts stress the need for improved governance and regulatory oversight to stabilize the banking sector, which is also seeing rising defaults in construction and agriculture. Overall, the financial health of banks is declining, posing risks to customer deposits and long-term stability.
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