Dhaka, Bangladesh (BBN)- The latest Financial Stability Report (FSR) 2025 from the Bangladesh Bank (BB), the country's central bank, paints a concerning picture of the country's banking sector.
🔹 Distressed loans surged by over 47% to BDT 10.08 trillion by end-2025.
🔹 If written-off loans are included, total distressed assets rise to BDT 10.87 trillion—equivalent to almost 60% of the banking sector's total outstanding loans and advances of BDT 18.21 trillion.
đź“Ś Composition of Distressed Assets
• Defaulted loans: BDT 5.57 trillion
• Unclassified rescheduled loans: BDT 2.69 trillion
• Loans under court stay orders: BDT 1.82 trillion
• Written-off loans: BDT 834.79 billion
The scale of distressed assets is larger than Bangladesh's proposed national budget for the fiscal year (FY), 2026-27, and highlights the depth of vulnerabilities within the financial system.
Why does it matter?
Distressed loans are a broader measure of banking-sector stress than NPLs alone. They include non-performing, rescheduled, litigated and written-off loans—assets with elevated recovery risks and weakened repayment prospects.
The central bank attributes the deterioration in asset quality to:
✔️ Imprudent lending practices
✔️ Weak credit oversight and monitoring
✔️ Slow recovery of defaulted loans
✔️ Global geopolitical shocks
✔️ Domestic economic challenges affecting business cash flows
⚠️ Capital Adequacy Under Pressure
The banking sector's Capital-to-Risk-Weighted Assets Ratio (CRAR) deteriorated sharply from 3.08% in 2024 to -2.64% in 2025, far below the Basel III minimum requirement of 10%.
Key takeaway:
The challenge facing Bangladesh's banking sector is no longer limited to rising NPLs. The combination of mounting distressed assets, negative capital adequacy, weak profitability and sluggish loan recovery points to a broader systemic issue requiring decisive regulatory, governance and balance-sheet reforms.
BBN/SSR/AD