Six private banks witness nearly a threefold surge in bad loans within a year

Bad loans at six private commercial banks nearly tripled in the year leading up to September 2024, central bank data reveals, a trend bankers describe as "alarming." By September this year, these banks collectively held Tk 80,573 crore in defaulted loans, a staggering 171 percent increase from Tk 29,645 crore in September 2023. Among them, National Bank reported the highest volume of bad loans, with Tk 23,722 crore—55.81 percent of its total disbursed loans. 

National Bank now faces a provision shortfall of Tk 16,614 crore, up from Tk 13,515 crore in bad loans the previous year. Following the establishment of an interim government in early August, the central bank restructured the boards of 11 banks, including National Bank. Despite its once-thriving past as the country’s first private commercial lender, the bank’s decline stems from severe loan irregularities, governance issues, and internal director conflicts. During the Awami League’s 16-year tenure, the Sikder Group held significant control over the bank. Recently, Abdul Awal Mintoo, a businessman and vice-chairman of the Bangladesh Nationalist Party (BNP), assumed the role of chairman.

Islami Bank Bangladesh also saw its bad loans spike, reaching Tk 17,752 crore by September this year, up from Tk 7,084 crore the previous year. Bad loans now account for 11 percent of its total disbursed loans. Documents indicate that the Chattogram-based S Alam Group and its affiliates, which held sway over the bank until mid-August, were responsible for over 50 percent of Islami Bank’s Tk 163,863.78 crore in loans.

Other banks affected by the S Alam Group include First Security Islami Bank, Union Bank, and Global Islami Bank, all of which experienced sharp rises in defaulted loans. Year-over-year, First Security Islami Bank’s bad loans surged by Tk 10,933 crore to Tk 12,948 crore, Union Bank’s rose by Tk 11,374 crore to Tk 12,218 crore, and Global Islami Bank’s increased by Tk 3,570.91 crore to Tk 3,816.91 crore. The central bank has since dissolved the boards of these banks and installed new management.

AB Bank, another private sector lender, saw its bad loans rise by Tk 4,176 crore to Tk 10,116 crore by September 2024. Industry experts cite weak recovery efforts from top borrowers as a key factor in the growing volume of non-performing loans.

According to central bank data, bad loans across the entire banking sector reached Tk 284,977.31 crore by September 2024, of which Tk 149,806.33 crore were held by 43 private commercial banks. This equates to 11.88 percent of their total disbursed loans, up sharply from Tk 81,537.81 crore in the same period last year.

Anis A Khan, former chairman of the Association of Bankers, Bangladesh (ABB), predicts further increases in bad loans. He attributes this trend to large-scale capital flight, which has drained liquidity from the banking system, and the adverse impacts of global and domestic economic challenges on businesses.