Banks Confront Tk6.5 Lakh Crore Default Amid Governance Crisis

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Bangladesh’s banking sector is facing serious challenges as the newly elected government assumes control of a crisis-hit economy.

With nearly Tk 6.5 lakh crore in defaulted loans, $234 billion reportedly siphoned abroad, and structural weaknesses across the system, stakeholders say urgent reforms are needed to stabilise the sector.

Experts believe the government must prioritise restoring governance in banks, recovering defaulted loans, and curbing money laundering to support the broader economy.

During the previous government, prolonged irregularities, weak oversight, and unplanned loan disbursements placed the sector under severe strain. Former Managing Director of Mutual Trust Bank, Anis A Khan, said structural reforms are essential for sustainable recovery and suggested forming a task force to identify weaknesses and tackle defaulted loans.

According to September 2025 data from Bangladesh Bank, more than one-third of all disbursed loans have now defaulted. Defaulted loans total nearly Tk 6.5 lakh crore, representing 35.73 percent of the Tk 18,03,840 crore in outstanding loans. Allegations of underreporting in previous years mean the true scale of the problem has only recently become clear.

Former Bangladesh Bank Governor Farashuddin Ahmed described defaulted loans as a “cancer” in the sector. He stressed that restoring discipline is critical to prevent fraudulent lending, curb informal money transfers (hundi), boost remittances, and strengthen foreign exchange reserves. He also highlighted the importance of controlling inflation and increasing revenue collection.

During the interim government, boards of 14 banks were dissolved, six banks merged, and Tk 52,500 crore in liquidity support was provided. Policy measures included raising the interest rate to 10 percent and implementing several ordinances, yet stability remains a work in progress.

The White Paper Committee reviewing the economy over the past 15 years reported that a system of “crony capitalism” evolved into what it described as a “kleptocracy,” with politicians, military, civil officials, and members of the judiciary allegedly involved. The committee estimated $234 billion was illicitly transferred abroad through 28 channels.

Agrani Bank Chairman Syed Abu Naser Bakhtiar said Bangladesh Bank has effectively controlled hundi and stabilised the foreign exchange market over the past year and a half. Promotional efforts in remittance-sending countries increased inflows and strengthened reserves.

He urged the new government to adopt a zero-tolerance policy against hundi and launch a comprehensive programme to restore governance across the banking sector, emphasising that these steps are essential for economic stability.