Banking crisis deepens: Bad loans trigger record provision shortage

The health of Bangladesh’s banking sector has taken a drastic turn for the worse, with provisions shortfall against bad loans hitting an all-time high of Tk 1.7 lakh crore in March 2025—a shocking 61% jump in just three months.
The alarming surge highlights the growing pile of toxic assets being unfolded officially amid the central bank stance for proper reporting.
Bangladesh Bank data reveals that the provision deficit, which stood at Tk 1.06 lakh crore in December 2024, has ballooned to Tk 1.70 lakh crore by March 2025. Experts blame years of concealed financial mismanagement under the previous Awami League-led government, which was ousted in August 2024.
The central bank’s recent push for transparency has exposed the true scale of the crisis, ending years of preferential treatment for politically backed borrowers. With non-performing loans (NPLs) spiraling out of control, banks are now struggling to meet mandatory provisioning rules, laying bare systemic failures—rampant loan scams, weak oversight, and political meddling.
Private banks have been hit the hardest, their provision shortfall more than doubling from Tk 48,883 crore in December to Tk 1.07 lakh crore in March. They now account for 63% of the sector’s total deficit.
State-run banks are also under severe stress, with their deficit rising to Tk 63,996 crore in March from Tk 57,966 crore in December.
Banks have to set aside a portion of their income as provision against risky assets that increases their shock absorption capacity.
Bad loans in the banking system shot up by Tk 74,570 crore in just three months, reaching a record Tk 4.20 lakh crore at the end of March 2025.
Shockingly, nearly one in every four loans (24.13%) in Bangladesh is now classified as non-performing—the worst in South Asia.
Private banks alone hold Tk 2.64 lakh crore in defaulted loans, while state-owned banks account for Tk 1.46 lakh crore.