Tk 11 Trillion in Bank Loans Classified Problematic: Experts

City Bank Managing Director Masrur Arefin has raised serious concerns over the health of Bangladesh’s banking sector, stating that nearly Tk 11 trillion of the total Tk 18 trillion in outstanding loans are in a distressed state. His remarks came at a panel discussion on “Banking Sector: Crisis, Reform and Regulation,” held Sunday at Dhaka University’s Nawab Nawab Ali Chowdhury Senate Bhaban auditorium.

Speaking before an audience of academics, students, and banking stakeholders, Masrur Arefin highlighted that out of Bangladesh’s 60 banks, 50 are local, and roughly 40 are of poor quality, with about 15 classified as “zombie banks.” He added that half of these banks have suffered major financial mismanagement and plundering, raising serious questions about governance and regulatory oversight.

“Just as a single individual can destroy a bank, conversely, even one or two honest directors are enough to ensure a bank’s success,” Masrur Arefin said. He also blamed past mismanagement on both anonymous actors and systemic weaknesses, noting that some irregularities were not due to legitimate shareholding but concealed ownership structures.

The panel discussion was jointly organized by Dhaka University, the University of Asia Pacific (UAP), and Germany’s OTH Amberg-Weiden. The event featured a keynote presentation by Mahmud Osman Imam, Dean of the Faculty of Business Studies at Dhaka University, who emphasised the complexity and high costs of financial sector reform.

According to Imam, certain banks—commonly referred to as zombie banks—face default rates exceeding 90 percent of disbursed loans. He urged the government to grant Bangladesh Bank effective independence and recommended amendments to the Bank Company Act, including limiting family representation on boards to two directors, shortening tenure from 12 to six years, and ensuring that chairpersons and executive chairs come from outside bank ownership to improve transparency and accountability.

Panelists also expressed concern over rising non-performing loans. Pubali Bank Managing Director Mohammad Ali said defaulted loans had risen from Tk 3.45 trillion in December 2024 to Tk 4.2 trillion in March 2025, and are projected to increase by another Tk 1.5 trillion by June 2025. He warned that 30 to 40 percent of total disbursed loans are now defaulted, exacerbating a liquidity crisis that has left many depositors unable to access their funds.

Bank Asia Managing Director Sohel RK Hussain stressed that independent directors, stronger whistleblowing policies, and increased accountability of rating agencies are critical. “Twelve banks are practically bankrupt, unable to return depositors’ money. What actions have rating agencies, the Anti-Corruption Commission, and Bangladesh Bank audits revealed?” he questioned, underscoring the urgent need for effective oversight.

Masrur Arefin criticised certain provisions of the draft Bank Company Act, including the requirement for 50 percent independent directors even in well-managed banks, and limits on family shareholding, stating that much of the plundering occurred under anonymous ownership, not legitimate family holdings.

The panel concluded with a consensus that ensuring the operational independence of Bangladesh Bank, strengthening regulatory frameworks, and enhancing governance practices in both state-owned and private banks are essential to prevent further deterioration of the sector.

The discussion was attended by other senior banking officials, including Pubali Bank Managing Director Mohammad Ali and Bank Asia Managing Director Sohel RK Hussain, along with faculty members and students of Dhaka University and other universities.