The latest report from the Bangladesh Bank reveals a significant increase in classified loan accounts within the banking sector. In March 2026, the number of such accounts surged to 45.83 lakh, more than double the figure from the previous year. Notably, retail loan accounts saw the most drastic rise, with accounts carrying classified loans up to Tk 1 crore reaching 45.43 lakh compared to 21.63 lakh a year earlier.
The Bangladesh Bank report titled “Banking Sector Update,” published on July 23, highlighted a widespread deterioration at the retail level. Factors such as the escalating cost of living, household debt burden, reduced SME activity, and weakened repayment capacity in agricultural and small-trading sectors were attributed to this trend. The report emphasized that while high-value defaults create significant monetary impacts, the surge in defaults among smaller accounts signals broader financial stress.
The report raised concerns over the increase in nonperforming loans (NPLs), which rose to 32.7 percent of total outstanding loans in March 2026 from 24.6 percent a year ago. It labeled the rising NPL ratio as alarming and pointed out vulnerabilities in Islamic banks and state-owned banks, indicating potential issues with credit discipline and governance. In contrast, foreign banks demonstrated lower default rates, reflecting more stringent risk management practices.
The report noted a rise in classified loans across all bank types—state-owned, private, and Islamic—between March 2025 and March 2026. Industry-wise analysis revealed that the cottage industry faced the highest vulnerability with a classified loan ratio of 52.8 percent, reflecting severe repayment stress among small businesses. Additionally, the combined CMSME and informal sectors, accounting for 21.4 percent of total loans, represented 34.2 percent of classified loans, highlighting credit quality concerns in these segments.
While the large industry segment accounted for a significant portion of total loans (58.7 percent) and classified loans (39 percent), it posed the most substantial credit risk in the banking sector. Md Mahiul Islam, Deputy Managing Director and Head of Retail Banking at BRAC Bank, suggested that inadequate credit risk assessment and factors like high inflation and reduced purchasing power could contribute to the spike in classified loans. However, he highlighted that BRAC Bank’s proactive credit appraisal and client monitoring strategies have kept the NPL ratio for retail and SME loans below 3 percent.
The report emphasized that classified loan ratios increased across all industries, with trade, agriculture, and industry sectors facing heightened risks between March 2025 and March 2026. The industry sector accounted for the majority of total loans (44.5 percent) and NPLs (32 percent), while the trade and commerce sector held 32 percent of total loans and 43.8 percent of classified loans, indicating underlying stress in the real economy possibly influenced by global economic challenges and weak financial discipline.
The central bank report attributed the banking crisis to “willful defaulters” and major corporate entities rather than individual borrowers. It suggested potential weaknesses in credit appraisal and monitoring systems for high-value loans or the impact of sectoral and macroeconomic shocks on large borrowers.
