In response to the surge in defaulted loans, Bangladesh Bank has introduced stricter lending regulations to curb risky lending practices. By June 2025, defaulted loans in the banking sector reached a record high of Tk5,30,428 crore, prompting the central bank to act decisively.
Bangladesh Bank, through BRPD Circular Letter number 18, has instructed all scheduled banks to implement the Internal Credit Risk Rating System (ICRRS) more rigorously when approving, renewing, or restructuring loans. Borrowers who receive an “Unacceptable” rating will undergo enhanced due diligence, including thorough checks on their repayment capacity, collateral, and compliance with board-set conditions. Banks are also required to submit quarterly reports to the regulator on such cases.
The move comes as the banking sector grapples with escalating stress. Defaulted loans jumped by over Tk 1,10,000 crore in just three months, from Tk 4,20,000 crore in March 2025. The rise has created liquidity pressures, with banks borrowing a record Tk1,45,000 crore from the central bank’s repo window in June to cover the shortfall.
Bangladesh Bank officials assert that the stricter rules are necessary to restore discipline to a sector long affected by weak credit practices. However, bankers have expressed concerns over the practical challenges of implementing the new rules, particularly as many institutions lack the resources and expertise for enhanced risk assessment. Smaller businesses may also face difficulties accessing credit under the stricter lending criteria.
Despite these concerns, regulators remain firm in their stance, insisting that the measures are essential. With defaults continuing to rise, Bangladesh Bank is confident that tighter oversight will prevent further deterioration and ensure greater accountability in the country’s banking system.