Bangladesh’s banking sector is facing mounting pressure as non-performing loans (NPLs) have surged to alarming levels, raising concerns over the country’s  financial stability.

The total volume of NPLs has crossed Tk 6.44 lakh crore which is about 35.7 percent of all outstanding loans in the banking sector, according to the latest editorial published in the October-December 2025 News Bulletin of the International Chamber of Commerce-Bangladesh (ICC Bangladesh).

The figure is far higher than international benchmarks where NPL ratios in stable economies usually remain below 5 percent.

Excessive NPLs weaken bank balance sheets, erode capital adequacy, curtail lending capacity, inflate borrowing costs, deter fresh investment, and pose grave risks to depositors and the wider macro-economy, the editorial

It said the crisis has been partly exposed by recent regulatory directives from Bangladesh Bank, which have required banks to report defaulted loans more accurately, revealing long-standing weaknesses in the system.

The editorial stressed the need to distinguish between wilful default and genuine business difficulties.

Viable enterprises must receive structured support while wilful defaulters face firm and transparent action, it said.

It called for a balanced approach to sustain economic momentum.

Referring to global experience, the editorial underlined the importance of a strong and independent central bank to prevent systemic risks.

Bangladesh Bank, which is responsible for monetary policy, prudential regulation, crisis management and oversight of payment systems, must function with transparency and professionalism to strengthen investor confidence and economic resilience, it added.

Over the past two years, the central bank has taken emergency measures such as liquidity support, deposit guarantees and refinancing facilities to protect depositors during periods of financial stress.

These steps are in line with international best practices, it noted.

The editorial also highlighted the Bank Resolution Ordinance 2025 as a major reform initiative that provides a formal framework for resolving distressed banks.

In a historic move, five Shariah-based banks were merged into a single state-owned entity, marking the largest financial consolidation in Bangladesh so far.

The editorial cautioned that mergers involving publicly listed companies usually require shareholder approval under the Companies Act.

While consolidation can address immediate threats, its long-term success will depend on strong supervision, improved governance and modern risk management systems, it said.

Bangladesh, the editorial observed, is at a critical stage where the financial system is expected to support export diversification, expansion of cottage, micro, small and medium enterprises, technological innovation, climate-resilient investment and large infrastructure projects.

Key recommendations include strengthening the autonomy of Bangladesh Bank to enforce discipline, taking firm action against wilful defaulters, improving bank governance and transparency, aligning with global risk standards, promoting responsible lending and building regulatory capacity.

The goal is not only to avert crisis, but to build a trusted financial system that supports sustainable transformation at home and abroad, it said.

ICC Bangladesh said it would continue working with all stakeholders to help build a stable, credible and globally respected financial system.