One-third loans in default, fix may take a decade: BB Governor

Bangladesh Bank Governor Dr Ahsan H Mansur has warned that restoring financial discipline in the country’s banking sector will take 5 to 10 years, as the volume of defaulted loans has reached an “alarming and unprecedented level.”

Speaking at the inaugural session of the 4th Bangladesh Economic Summit 2025 at Hotel Sonargaon in Dhaka on Saturday, November 29, he said decades of mismanagement and policy failures have now pushed the sector into deep crisis.

“One-third of the country’s total outstanding loans are now classified as default,” the Governor said. “The system is running on the remaining portion. This pressure has become a grave threat to the entire financial structure.”

According to him, the default rate – once presented officially as single-digit – has now exceeded 35 per cent, and continues to rise with stricter loan classification and updated reporting standards.

LC situation stable ahead of Ramadan

Despite the credit crisis, Dr Mansur noted that Bangladesh has sufficient dollar reserves to support imports ahead of Ramadan. He said LC openings have increased by 20 per cent–50 per cent compared to last year, indicating easing pressure in foreign trade.

Business leaders blame poor governance, policy burden

Business and economic leaders speaking at the summit echoed concerns over the unstable banking environment and declining investment confidence.

BIDS Director General Dr AK Enamul Haque criticised current economic governance, saying,

“The system is operating on a ‘catch-the-thief mentality,’ eroding trust. Without confidence, investment cannot move forward.”

He added that regulatory agencies lack accountability, and the tax administration continues to operate with a “landlord mindset,” prioritising revenue instead of economic expansion.

Ha-Meem Group Chairman AK Azad expressed worry over the impact of tight monetary policy: “High interest rates and only 6 per cent credit growth in the private sector have nearly halted industrial expansion.”

Bangladesh Steel Manufacturers Association President Jahangir Alam said the tax structure is becoming punitive for manufacturers.

“We pay duties, AIT, and now turnover tax has increased tenfold – from 0.1 per cent to 1 per cent. Even loss-making companies must pay taxes, which is unheard of globally.”

Banking discipline improving, says City Bank MD

City Bank Managing Director Masrur Arefin offered optimism, noting early signs of improved governance in the banking sector.

“Loan approvals are no longer decided casually in boardrooms. Compliance-based lending is returning.”

He added that private investment may rebound after political clarity post-national elections.