BB rejects reports claiming distressed loans account for up to 60% of banking sector

The Bangladesh Bank has rejected recent media reports claiming that distressed loans in the country’s banking sector account for between 45% and 60% of total loans, saying the estimates are based on technically flawed calculations and do not reflect the actual condition of the sector.

In a clarification issued today (17 June), the central bank said the reported figures were inconsistent with the methodology used in its Financial Stability Report (FSR) 2025 and should not be treated as an accurate measure of banking sector risks.

According to the report, the official non-performing loan (NPL) ratio stood at 30.60% as of 31 December 2025. Bangladesh Bank said this audited and finalised figure remains the authoritative measure of the sector’s non-performing assets.

The central bank noted that some reports had calculated so-called distressed loans by combining non-performing or classified loans, rescheduled loans and written-off loans.

“It is not appropriate to aggregate these categories in this manner,” the regulator said, adding that such calculations are technically incorrect and lead to exaggerated estimates of financial stress in the banking sector.

The Bangladesh Bank further said there is no internationally recognised or standardised definition of “distressed loans” used by global regulatory and policy-making institutions.

While the term is sometimes used broadly to describe loans facing repayment difficulties, the methodology applied in the reports does not conform to accepted regulatory or accounting standards, it added.

Explaining its position, the central bank said rescheduled loans should not automatically be treated as distressed assets because borrowers continue to make repayments under approved restructuring arrangements. These loans remain active assets that generate cash flow for banks.

It also noted that written-off loans are maintained off-balance sheet in line with international accounting practices and therefore should not be added to active loan portfolios when assessing the current health of the banking sector.

Bangladesh Bank warned that publishing unverified or technically inaccurate financial data could create misleading perceptions about the country’s financial stability among domestic and international stakeholders, potentially affecting investor confidence and the broader economy.

The regulator urged media organisations to exercise greater caution when reporting on the financial sector and to verify data with official sources before publication.

The clarification comes amid increased public attention on the banking sector following the release of the Financial Stability Report 2025 and ongoing discussions over the scale of problem loans in the country’s banks.