Bad loans at fraud-hit banks rise sharply following political transition

At the end of last year, defaulted loans in the banking sector totaled Tk 345,765 crore, with state-run and private commercial banks holding the majority. Among them, non-performing loans (NPLs) at state-owned Janata Bank soared to a record Tk 67,148 crore by the end of 2024, accounting for 72 percent of its total disbursed loans, according to Bangladesh Bank (BB) data.

Bad loans at Janata Bank surged by 284 percent in just one year, rising from Tk 17,501 crore, or 19.2 percent of its total lending, at the end of 2023. Once a respected lender, Janata Bank became notorious for a series of scams and loan irregularities involving Anontex, Crescent, Beximco, Thermax, and S Alam Group during the previous government's tenure.

Bad loans linked to these five defaulters exceeded Tk 45,000 crore.

The bank is now grappling with a severe liquidity crisis, hindering its regular banking operations. To alleviate the cash crunch, it recently sought Tk 20,000 crore in liquidity support from the interim government and the central bank.

Md Mazibur Rahman, managing director of Janata Bank, told The Daily Star last week that since the political transition in August, the bank's new management has been working to address loan irregularities. Legal action is now being taken against defaulters, he added.

At private-sector National Bank, defaulted loans increased by 109 percent year-on-year to Tk 25,846 crore by the end of 2024, making up 61 percent of total disbursed loans.

After the interim government took office in August, the central bank restructured the boards of 11 banks, including National Bank.

National Bank, once a leading private-sector lender, became a loss-making entity due to widespread loan irregularities, poor governance, and boardroom conflicts. During the 16-year tenure of the previous Awami League government, business conglomerate Sikder Group dominated the bank. Following the political transition, Abdul Awal Mintoo, a businessman and vice-chairman of the Bangladesh Nationalist Party (BNP), was appointed as its chairman.

Defaulted loans at Islami Bank Bangladesh surged to Tk 32,817 crore by the end of 2024, up from Tk 6,919 crore a year earlier, accounting for 21 percent of total lending.

Islami Bank was among the worst-affected banks, largely due to the influence of the controversial business conglomerate S Alam Group, which controlled the board of the country's largest Shariah-based bank until mid-August last year.

The Chattogram-based conglomerate and its affiliated firms borrowed over 80 percent of Islami Bank's total Tk 155,659 crore in loans. Other banks under S Alam Group's influence—First Security Islami Bank, Union Bank, BCB, and Global Islami Bank—also experienced a sharp rise in bad loans last year.

Year-on-year, defaulted loans at First Security Islami Bank surged by Tk 15,710 crore to Tk 17,851 crore. At Union Bank, bad loans increased by Tk 23,992 crore to Tk 24,835 crore, while at BCB, they rose by Tk 224 crore to Tk 1,432 crore. At Global Islami Bank, defaulted loans climbed by Tk 4,216 crore to Tk 4,442 crore.

Following the political transition, these banks were freed from S Alam Group's influence after the central bank dissolved their boards and appointed new ones.

Officials at these banks stated that a significant portion of the loans disbursed to S Alam Group and its associated firms is now in default.

Defaulted loans at AB Bank stood at Tk 8,573 crore at the end of last year, up from Tk 5,272 crore a year earlier. Bad loans at IFIC Bank increased by Tk 14,603 crore to Tk 17,182 crore over the same period.

Salman F Rahman, a close adviser to ousted prime minister Sheikh Hasina, was the chairman of IFIC Bank. Following the government's fall, the central bank restructured the board and removed the Rahman-led management.

Officials at the bank told The Daily Star that despite Rahman's Beximco Group holding only a 6 percent stake, it wielded significant influence over IFIC, securing around Tk 10,000 crore in loans—posing a major risk for a bank of its size.

Bad loans at state-run Agrani Bank reached Tk 27,932 crore, or 38.45 percent of its total lending. The bank faced difficulties due to excessive exposure to a few large borrowers, including Bashundhara Group, Orion Group, Zakia Group, and Joj Bhuyia Group, according to BB documents.

Social Islami Bank, another lender previously controlled by S Alam Group, saw its bad loans rise to Tk 13,267 crore, or 35 percent of total disbursed loans.

Padma Bank's defaulted loans increased to Tk 4,870 crore, or 87 percent of its total lending. A few years after its launch, the bank was hit by a massive scam and loan irregularities.

ICB Islamic Bank had the highest default loan ratio, with bad loans accounting for 91 percent of its total lending by the end of last year.

Bankers said defaulted loans surged in 2024 as large borrowers defaulted heavily following the Awami League's exit, pushing overall bad loans to unprecedented levels.

Additionally, they noted that the central bank’s push for greater transparency led banks to disclose more accurate figures, including previously concealed bad loans.