Bangladesh Bank’s latest report reveals that as of September 2025, nearly 91% of all defaulted loans in the banking sector have become unrecoverable, posing a severe threat to the country’s financial stability. The total volume of defaulted loans reached BDT 6.44 trillion, with BDT 5.85 trillion classified as bad or loss category. This marks a sharp rise from the previous year, when unrecoverable loans accounted for about 82% of total defaults.

Sector insiders attribute the surge to large business groups that borrowed heavily during the previous Awami League government and allegedly siphoned funds abroad. Following political changes, many borrowers fled the country, further reducing recovery prospects. State-owned banks hold the largest share of bad loans, with Janata Bank alone reporting BDT 695.86 billion in unrecoverable debt. Private banks, including Islami Bank Bangladesh and First Security Islami Bank, also face mounting pressure.

Experts warn that the growing volume of bad loans will erode banks’ lending capacity and profitability, as they must maintain full provisioning against such debts. Bangladesh Bank has identified 24 commercial banks failing to meet required provisions, signaling deep structural stress in the sector.