Why did default loans double in just nine months?

Following the fall of the Awami League government, default loans in the banking sector have registered a steep surge. In fact, the scenario was quite similar during the ousted government, but they resorted to various tactics to hide the true figures.

Before each national election, special policies were introduced to help borrowers regularise defaulted loans. Also, they were exempted from being defaulters under special arrangements whenever any local or global crisis emerged. Still, the reported volume of defaulted loans went up significantly during the previous government.

When the Awami League assumed office in 2009, total default loans were just Tk 224.81 billion. This figure ballooned to Tk 2.11 trillion in June 2024, shortly before the government’s ouster through a mass uprising.

In March 2025, default loans were estimated to have doubled to Tk 4.2 trillion. What are the reasons behind this steep surge?

When a borrower fails to repay a loan on time, the loan becomes defaulted. Banks lend from the deposits they hold. If loans are not repaid, depositors face issues while withdrawing their money.

There are some key issues behind the rise in default loans. Many of the current defaults resulted from irregular loans disbursed under the previous government. The default loans that were not reported under the previous regime are now being disclosed. Many businesses linked to Awami League are now defaulting on their loans, which has pulled up the overall volume of non-performing loans.

Besides, many are being forced to be defaulters due to ongoing slowdown in businesses.

Bangladesh Bank has reinstated international standards for classifying loan quality, starting from April. According to the policy, any loan not repaid within the scheduled time is marked overdue, and if it remains unpaid for 90 days, it is classified as defaulted. However, the latest default loan figures are calculated until March this year.

First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and EXIM Bank contributed the most to the default loans. Their assets were evaluated by international firms, which alone led to a Tk 700 billion rise in their defaulted loans.

Aside from EXIM Bank, four of these banks were under the control of S Alam Group, a business conglomerate with close ties to former prime minister Sheikh Hasina. The group took out a huge sum of loans from the banks on various pretexts, and those are being defaulted now. The banks are likely to see more rise in their non-performing loans.

Janata Bank, Agrani Bank, National Bank, IFIC Bank, and Union Bank topped the list of default loans.

Since the political changeover in August 2024, many businesses linked to the former ruling party have slowed down, triggering loan defaults. The loans that were rescheduled previously under special considerations are now being defaulted, as the banks are now reporting actual figures.

Syed Abu Naser Bukhtear Ahmed, chairman of Agrani Bank, said the current trend of rising default loans must be contained immediately. It requires actions from both Bangladesh Bank and the finance ministry.