Bangladesh’s banking sector could see Tk6.23 lakh crore in additional private-sector lending by fiscal year 2029, but more than half of that opportunity may fall within the lending capacity of just 14 banks as bad loans and capital shortages weigh on most of the industry.
Investment banking firm CAL Bangladesh made the projection in a banking-sector research report released on Thursday, forecasting private-sector credit to grow 34.3 per cent from Tk18.17 lakh crore in June 2026 to Tk24.40 lakh crore by FY2029.
The forecast comes against a stark financial backdrop. Non-performing loans (NPLs) reached 32.8 per cent of total lending in June 2026, up from 9 per cent in December 2023, while banks faced a Tk2.2 lakh crore shortfall in provisions against potential loan losses.
The industry’s overall capital adequacy ratio stood at negative 2.64 per cent, exposing a divide between banks capable of expanding credit and those struggling to absorb existing losses.
CAL’s report, Banking on the Next Cycle: Capital, Credit and the Banks Positioned to Win Bangladesh’s Next Cycle, identifies 14 institutions it calls “Cycle-Ready Banks”, whose stronger balance sheets could position them to benefit disproportionately from the next lending cycle.
They are BRAC Bank, City Bank, Eastern Bank, Pubali Bank, Dutch-Bangla Bank, Bank Asia, Dhaka Bank, Jamuna Bank, Midland Bank, Mutual Trust Bank, NCC Bank, Prime Bank, Southeast Bank and Trust Bank.
Their combined loan portfolio could expand 62 per cent from Tk5.56 lakh crore to Tk9.02 lakh crore by FY2029, creating additional lending capacity of Tk3.46 lakh crore.
That represents 55.5 per cent of the projected increase in system-wide private credit, although CAL describes the estimate as a capital-capacity scenario rather than a guaranteed lending forecast.
The selected banks had a combined capital adequacy ratio of 15.8 per cent in December 2025, substantially stronger than the industry’s overall position.
The divide is already visible in loan quality.
Ten banks account for 74 per cent of the industry’s classified loans, while the 14 selected institutions had a median NPL ratio of just 3.8 per cent, according to CAL.
Twelve of the 14 also maintained provisions exceeding their classified loans, reducing their potential exposure to further provisioning charges.
Across the industry, however, 19 of 61 banks failed to meet the minimum 10 per cent capital adequacy requirement. CAL estimated the sector’s capital gap against a 12.5 per cent reference level at Tk2.56 lakh crore.
The uneven financial positions suggest that any recovery in lending could widen the gap between healthier banks and those requiring restructuring or fresh capital.
CAL expects annual private-credit growth to accelerate from 4.75 per cent to 8 per cent in FY2027, 11 per cent in FY2028 and 12 per cent in FY2029.
The projections depend on easing inflation, lower borrowing costs, stronger deposit growth and renewed demand for loans from businesses and households.
Retail lending could recover first as consumer spending improves, followed by industrial borrowing and trade finance as investment and imports strengthen.
Yet even the better-capitalised banks face a profitability challenge.
Their combined net interest income fell 38 per cent in the first half of 2026 compared with a year earlier, despite a 33 per cent increase in net profit.
Investment income was equivalent to 125 per cent of pre-provision operating profit, indicating that securities earnings helped offset weakness in core lending operations.
The report suggests that falling government bond yields could provide additional investment gains, but sustainable profitability will ultimately require stronger income from lending.
Interest-rate regulation presents another risk.
Although a 4 per cent ceiling on lending-deposit interest-rate spreads was introduced in June, 55 of 61 banks were still operating above that limit in July.
Strict enforcement could squeeze margins if lending rates fall faster than banks can reduce their deposit costs.
Among listed banks, CAL favours BRAC Bank, City Bank, Eastern Bank, Pubali Bank and Dutch-Bangla Bank, citing their relatively strong capital positions, customer networks and lending prospects.
Together, these five banks could expand their loan portfolios by approximately 80 per cent to Tk5.28 lakh crore by FY2029, according to the report’s projections.
BRAC Bank’s small-business franchise, City Bank’s retail and payments operations, Eastern Bank’s transaction banking, Pubali Bank’s nationwide network and Dutch-Bangla Bank’s low-cost deposits provide different avenues for growth.
But the outlook remains vulnerable to weak investment demand, renewed deterioration in loan quality and further capital constraints.
CAL also warned that distress at weaker banks could trigger deposit withdrawals and wider liquidity pressure, complicating recovery across the sector.
The projected Tk6.23 lakh crore expansion is therefore far from assured. Even if capital and liquidity improve, borrowers must be willing and able to take on new loans.
For Bangladesh’s banks, the next credit cycle may be defined less by the size of the opportunity than by which institutions have the financial strength to seize it, CAL analysts said.
