Last month, a friend told me she withdrew all her savings from her bank after reading another NPL headline. Her hands shook as she explained: “I worked twenty years for that money.” And I understood her fear completely. You’ve probably seen the news: default loans hitting record highs, banks struggling, honest borrowers getting rejected while tycoons fly business class on unpaid billions.
The term “non-performing loan” sounds cold and technical, but it’s not. It’s about your savings, your business dreams, and whether you can trust the system with your hard-earned money. Here’s the real story, without the jargon, and what you can do about it starting today.
Keynote: What Is Non-Performing Loan
A non-performing loan is a classified debt where the borrower hasn’t made scheduled payments for 90 days or more. Banks must reclassify these loans from income-generating assets to probable losses, setting aside provisions ranging from 20% to 100% depending on severity. Bangladesh’s NPL crisis reached 34.6% by mid-2024, representing Tk 5.99 lakh crore in defaulted credit according to Bangladesh Bank’s quarterly report.
What Is a Non-Performing Loan (The Promise That Stopped Breathing)
The Simple Definition You Actually Need
Think of it like a friend who stopped answering your calls. You lent them money. They promised to pay you back monthly. Then silence.
A loan becomes non-performing when the borrower hasn’t paid for 90 days or more. Not 89 days. Exactly 90.
The bank stops earning interest and treats it as a probable loss. This isn’t just late payment. It’s a loan the bank doubts will ever be fully repaid.
And here’s what nobody tells you: your deposit sitting in that bank helped fund that loan.
The Three Shades of Bad Loans
Bangladesh Bank doesn’t see all bad loans the same way. They classify them into three categories, each with different recovery odds and different pain levels for the bank.
| Classification | Time Overdue | Recovery Likelihood | Provisioning Required |
|---|---|---|---|
| Substandard | 3 to 6 months | Moderate with effort | 20% of loan amount |
| Doubtful | 6 to 12 months | Low, seriously concerned | 50% of loan amount |
| Bad/Loss | Over 12 months | Essentially unrecoverable | 100% of loan amount |
Substandard means 3 to 6 months overdue. Some recovery is still possible with aggressive effort and legal pressure.
Doubtful sits at 6 to 12 months overdue. The bank is seriously worried about full recovery now.
Bad or Loss means over 12 months overdue. It’s essentially written off as unrecoverable, though legal action may continue.
Each category triggers different provisioning requirements that drain bank profits and lending capacity. When your Tk 10 lakh loan hits substandard, the bank must set aside Tk 2 lakh. At doubtful, that jumps to Tk 5 lakh. At bad/loss, the full Tk 10 lakh gets provisioned.
Why the 90-Day Line Changes Everything
Globally, 90 days is the regulatory red line. It’s not arbitrary.
Before 90 days, your loan is delinquent but banks still have hope and flexibility. They might call you, send reminders, offer short extensions. The relationship hasn’t broken yet.
After 90 days, mandatory reclassification happens and collection departments take over completely. The friendly relationship manager disappears. Legal teams appear.
Interest keeps accumulating but the bank must set aside cash to cover expected losses. Your loan shifts from bank asset to liability on their balance sheet. This transition destroys bank profits faster than almost anything else.
Bangladesh Bank recently tightened these rules under IMF pressure. From April 1, 2025, loans overdue 3 to 6 months become substandard, down from the previous 3 to 9 months threshold. They’re finally admitting what was always true.
The Rescheduling Trap Most People Miss
Banks sometimes extend timelines just to make books look clean temporarily. You’ve missed six payments, they add those to the end, reset the clock, and suddenly your loan looks current again on paper.
It’s called “evergreening” and it hides the injury without healing it at all.
Bangladesh’s crisis worsened because zombie loans were kept artificially alive for years. Political connections meant certain borrowers got rescheduled five, six, even seven times. Each rescheduling pushed the inevitable reckoning further down the road.
Multiple rescheduling signals you’re not serious about repayment. Eventually, even the most politically connected loan must be classified as NPL. The charade can’t continue forever, though some tried for a remarkably long time.
The Shocking Numbers That Should Scare You
Bangladesh Now Has Asia’s Worst NPL Crisis
We’ve gone from success story to cautionary tale in one decade. Let that sink in.
NPL ratio jumped from 6.1% in 2011 to over 35% by mid-2025. That’s approximately one in every three taka lent now non-performing nationwide, according to various estimates compiled from Bangladesh Bank data and independent analyses.
We went from Asia’s reform success to Asia’s worst banking crisis in just years. The Asian Development Bank confirmed in August 2024 that Bangladesh has the highest NPL ratio in Asia at 20.2% using standardized methodology.
India sits at 3.9%. Pakistan at 7.4%. But Bangladesh hit record highs repeatedly, each announcement more alarming than the last.
The Confusing Numbers and Why They All Matter
Here’s where it gets messy. Different sources report wildly different NPL figures, and they’re all technically correct.
| Source | NPL Ratio | Date | Methodology |
|---|---|---|---|
| World Bank | 9.57% | 2023 | Standardized global methodology |
| Bangladesh Headlines | 20.2% | End 2024 | Official Bangladesh Bank gross NPL |
| Bangladesh Headlines | 24.1% | March 2025 | Revised Bangladesh Bank figures |
| Various Reports | 27.09% to 35.7% | June 2025 | Including NBFIs and distressed assets |
Total bad loans estimated between Tk 4.20 lakh crore to over Tk 6 lakh crore depending on what you count.
World Bank reported 9.57% for 2023 using their standardized global methodology consistently applied across countries. Bangladesh headlines cited 20.2% by end 2024, then 24.1% in March 2025 as recognition improved. By June 2025, some reports showed 27.09%, others claimed 34.4% or even 35.7% when including all distressed categories.
Why the Same Country Shows Wildly Different Ratios
Gross NPLs count everything bad. Net NPLs subtract provisions already set aside, making the number look smaller.
Some include only banks. Others add non-bank financial institutions and distressed rescheduled loans that should have been classified years ago.
Rule tightening and IMF pressure forced recognition of previously hidden problems all at once. Banks that looked healthy on paper suddenly showed massive holes.
Always ask: which date, which definition, which institutions, which denominator was actually used. Without those details, NPL numbers are just noise designed to either panic you or reassure you, depending on who’s talking.
State Banks Are Drowning While Foreign Banks Stay Afloat
This gap reveals everything you need to know about governance versus economic destiny.
State-owned banks hit 44.6% to 45.79% NPL ratios by various 2024 and 2025 measurements. That’s catastrophically high and unsustainable. Nearly half of all money they lent is now non-performing.
Private commercial banks reached 32.9% NPL rate. Far from safe territory themselves, but not quite drowning yet.
Foreign banks maintained only 6.1% NPL rate. Same economy. Same customers. Same macroeconomic pressures. But completely different results.
This isn’t about Bangladesh being poor or our economy being weak. This is about political influence and weak supervision destroying institutions. Foreign banks proved good governance actually works here. They lend carefully, they collect aggressively, they don’t cave to political pressure.
How a Healthy Loan Turns Sick
The Borrower’s Side: When Life Breaks Good Intentions
Before we judge, let’s be honest about how life actually works.
Job loss happens. Illness strikes without warning. Floods destroy factories overnight. Market crashes wipe out businesses that were thriving last year. These aren’t excuses. They’re the reality of running a business or managing a household in an uncertain economy.
Small businesses feel cash flow gaps first, then monthly payments start slipping inevitably. You pay your workers because they need to eat. You skip the bank payment because the bank is faceless and distant.
COVID and global economic shocks pushed genuinely honest folks over the financial edge. I know a restaurant owner who had perfect payment history for eight years. Then lockdowns hit, revenue dropped to zero, and within four months his loan was classified.
The shame and fear keep people silent, and silence makes the financial hole grow bigger. By the time borrowers finally talk to their bank, they’re already six months behind and out of good options.
The Bank’s Mistakes We Cannot Ignore
Bangladesh Bank’s own assessment was brutal: “16 years of weak supervision rendered the entire sector ineffective.”
Loose credit checks and political pressure seeded billions in future NPLs systematically. Loans got approved based on connections rather than actual repayment capacity or solid collateral. The relationship manager knew it was risky. Their boss knew it was risky. But the call came from above, and the loan was approved anyway.
Concentration in one group or favored sector turned single shocks into cascading failures. When S Alam Group or Beximco faced trouble, dozens of connected loans collapsed simultaneously because nobody diversified risk properly.
Weak recovery systems meant bad loans sat untouched, accumulated, and spread the infection. Money Loan Courts had 72,543 pending cases involving Tk 1.78 trillion as of recent counts. That’s not a backlog. That’s a systemic collapse of accountability.
The Willful Defaulter Culture: Won’t Pay vs Can’t Pay
Some borrowers genuinely can’t pay. Bankruptcy, business failure, natural disasters beyond their control. These people deserve restructuring support and a path back to solvency.
Willful defaulters have the money but use political clout to simply refuse repayment. They’re not struggling. They’re stealing.
S Alam Group and Beximco defaulted massively after the political regime change in 2024. Billions in loans suddenly classified as non-performing once their political protection evaporated. These weren’t businesses that failed. These were deliberate strategies of borrow-and-never-repay enabled by corruption.
They siphon funds overseas through money laundering instead of honoring their original commitments. Bangladesh Bank’s March 2024 Circular No-06 finally defined willful defaulters with specific criteria: fraud or forgery, fund diversion to unauthorized purposes, collateral transfer without bank permission. These trigger travel bans and license revocations.
But enforcement remains inconsistent. The powerful still fly business class while genuine small business failures get crushed.
When the Whole Economy Squeezes Everyone
Higher interest rates raise monthly installments. When the central bank tightens monetary policy to fight inflation, borrowers with floating-rate loans suddenly face 2% or 3% higher interest. That Tk 50,000 monthly payment becomes Tk 65,000. For businesses operating on thin margins, that’s the difference between survival and default.
Inflation around 8% to 9% cuts real income. Your revenue stays flat but costs rise relentlessly. Businesses miss payments more frequently because there’s simply no money left after paying suppliers and workers.
Slow GDP growth reduces sales and revenues, creating vicious default cycles. When the economy contracts or stagnates, everyone sells less, earns less, and struggles more.
Dollar crisis and import cost pressures squeezed businesses until repayment became mathematically impossible. Garment exporters couldn’t get dollars to import fabric. Manufacturers couldn’t pay for machinery parts. The entire supply chain seized up, and loan payments stopped.
Why NPLs Hurt Everyone, Not Just Defaulters
Banks Get Weaker and Credit Freezes
NPLs are like a leak draining the entire water tank. One bad loan might seem small. Five thousand bad loans totaling billions destroys the institution.
Banks lose interest income immediately. That’s revenue vanishing overnight. Then they must provision billions for expected losses, which directly hits profits and capital adequacy ratios.
Provisioning requirements hit profits hard. A bank with Tk 10,000 crore in doubtful loans must set aside Tk 5,000 crore in provisions. That’s Tk 5,000 crore not available for new lending or shareholder returns.
Less lending means fewer new factories, shops, startups, and jobs being created today. When banks are paralyzed by past losses, they become ultra-conservative. Even creditworthy borrowers with solid business plans get rejected.
I’ve seen this personally. A friend with three years of perfect payment history and strong collateral got rejected for expansion financing. The loan officer told him privately: “Your application is perfect, but we’ve been ordered to freeze all new lending until our NPL ratio improves.”
Your Everyday Channels: Deposits, Prices, and Public Money
If banks wobble badly, depositor confidence drops and people start hoarding physical cash under mattresses. We saw hints of this in 2024 when NPL headlines accelerated.
Government may need taxpayer money to rescue failing state banks from complete collapse. That bailout means higher future taxes or fewer schools, hospitals, and roads built with public funds.
Your savings earn less interest as banks struggle to stay profitable and liquid. Fixed deposit rates that used to offer 9% or 10% now barely reach 6% or 7%, partly because banks can’t afford to pay more when billions are stuck in non-performing assets.
The honest depositor subsidizes the dishonest borrower. You did nothing wrong, but your returns shrink because someone else refused to honor their commitment.
The Inflation Connection You Feel at the Bazaar
To keep zombie banks alive, the central bank injects liquidity or prints more money. More money chasing the same goods equals higher prices for eggs, onions, and rice.
Your 1,000 taka note buys less today partly because of financial mismanagement at the top. The inflation you feel every time you shop isn’t just global supply chains or oil prices. Some of it comes from domestic banking sector dysfunction.
Good borrowers effectively subsidize bad ones through a hidden “dishonesty tax” on everyone. This tax doesn’t appear on receipts, but you pay it every single day through reduced purchasing power and higher borrowing costs.
The Signal International Investors Watch Obsessively
Foreign investors see high NPL ratios and immediately consider Bangladesh too risky for investment. They run the same analysis you should: if local banks can’t collect from local borrowers, what chance does a foreign investor have?
International banks increase transaction costs and scrutiny for Bangladeshi counterparties across the board. Letters of credit become more expensive. Trade finance gets harder to access.
Capital flight accelerates as confidence erodes, weakening the taka and driving import inflation higher. Smart money moves to more stable neighbors like Vietnam or India.
We lose the next generation of factories, tech startups, and jobs to those neighbors. This isn’t theoretical. The Asian Development Bank explicitly linked Bangladesh’s NPL crisis to reduced foreign direct investment and deteriorating credit ratings.
The Human Cost Behind the Statistics
The Small Business Owner Rejected Despite Perfect Record
Rina runs a small garment unit in Narayanganj. She needed funds for new machinery after her factory survived a devastating flood in 2023. Despite never missing a single payment in five years, her loan application was instantly rejected.
Her bank had frozen all new lending, drowning in NPLs from politically connected defaulters who owed hundreds of crores. The loan officer looked at her perfect repayment history and said honestly: “I wish I could help you, but our hands are tied.”
She had to let five workers go. Those weren’t just job losses on a spreadsheet. Those were families who depended on that income for rent, food, children’s school fees. Rina still carries the guilt of those terminations, punishment for crimes she never committed.
The Depositor Watching Their Dreams Shrink
Selim saved thirty years for his daughter’s university fees in a fixed deposit account. He sacrificed holidays, new clothes, restaurant meals. Every taka mattered.
This year his bank slashed interest rates offered, citing massive provisioning costs from NPLs. His education fund, which he calculated so carefully, now falls short by Tk 3 lakh.
He must work three extra years to make up the gap. Three years stolen because willful defaulters refused to pay and regulators refused to punish them effectively.
He’s being punished for defaults by borrowers he never met and had no say over. The injustice keeps him awake at night.
The Honest Borrower Crushed by Higher Interest Rates
Young entrepreneurs can’t get startup funding because risk appetite dropped to zero. The innovation economy everyone talks about? It’s stillborn when banks won’t lend to anyone without political connections or massive inherited collateral.
Existing good borrowers face interest rate hikes to cover losses from willful defaulters above them. Your home loan rate increased not because you’re risky, but because the bank needs to compensate for billions lost to powerful thieves.
Home loan and car loan costs are punishingly expensive partly because someone else refused to pay. You’re subsidizing their theft with every monthly installment you make faithfully.
The Shopkeeper Who Pays On Time But Gets Treated Like a Risk
Kamal runs a small electronics shop in Chittagong. He pays every installment exactly on time for three years without missing once. His credit discipline is impeccable.
Still gets rejected for expansion loan while a tycoon who owes billions gets another rescheduling with better terms. The loan officer won’t make eye contact when delivering the rejection. Everyone knows it’s not about creditworthiness.
This isn’t just economics. It’s the erosion of basic fairness and social trust. When honest effort means nothing and political connections mean everything, society fractures.
The anger and helplessness Kamal feels is completely justified and needs acknowledgment. We’ve built a system that punishes virtue and rewards vice. That’s not sustainable economically or morally.
What Happens After a Loan Becomes NPL
The Predictable Bank Steps From Calls to Court
First come reminders. Friendly at first, then increasingly urgent. Collection calls to you, your guarantor, your business partners.
Then collateral enforcement begins. Legal notices arrive by registered mail. Bank lawyers file cases in Money Loan Courts under the Money Loan Court Act 2003.
Banks can legally seize and auction collateral after 90 days at below-market prices. Your Tk 50 lakh property might sell for Tk 30 lakh at distress auction, and you still owe the balance.
If recovery looks completely hopeless, banks write off the loan. But that doesn’t end your legal liability. They can still chase you for decades if they choose.
The Bangladesh Bank official guidelines detail exact classification timelines and provisioning requirements banks must follow. The Banking Regulation and Policy Department enforces these rules, though enforcement quality varies dramatically.
Provisioning and Write-Offs Without the Confusion
Provisioning means booking expected loss on paper, even if cash hasn’t vanished yet. It’s an accounting entry that reduces reported profits and regulatory capital.
| Loan Status | Provisioning % | Example: Tk 10 Lakh Loan | Impact |
|---|---|---|---|
| Performing | 1-5% | Tk 10,000 to 50,000 | Normal business cost |
| Substandard | 20% | Tk 2,00,000 | Moderate profit hit |
| Doubtful | 50% | Tk 5,00,000 | Severe profit erosion |
| Bad/Loss | 100% | Tk 10,00,000 | Complete write-down |
Write-off removes it from active books but doesn’t always end recovery efforts permanently. The debt still exists legally. The bank just admits they probably won’t collect it.
Net NPL metrics subtract provisions, so official numbers can look smaller than reality. Bangladesh Bank reports both gross and net NPL ratios, and the gap between them shows how much banks have already provisioned.
Bangladesh currently has Tk 1.78 trillion tied up in 72,543 pending cases in Money Loan Courts. That’s recovery paralyzed by judicial backlog and deliberate delay tactics by powerful defaulters.
What This Means For Your Credit Score
NPL classification stays on your Credit Information Bureau (CIB) report for 5 to 7 years in Bangladesh. That’s not negotiable or erasable easily.
Future loan applications get automatically rejected across all banks during that entire period. The CIB system is shared nationwide. One default means every bank knows.
Can’t get credit cards, car loans, or even mobile phone contracts with credit facilities. Your financial life freezes for years.
Mortgage and business dreams deferred by years. Entrepreneurship becomes nearly impossible for you. By the time your CIB clears, the market opportunity has passed.
Bangladesh Bank’s Circular No-06 from March 2024 tightened willful defaulter identification. Those classified as willful face travel bans, license revocations, and permanent blacklisting. Court stay orders that previously kept defaulters off CIB lists are being challenged as regulatory loopholes.
What Can Be Done to Fix This Mess
Real Governance, Not Just Paperwork Promises
Bangladesh Bank needs genuine operational autonomy to punish defaulters regardless of political connections. The IMF Bangladesh program conditions require exactly this, but implementation remains the challenge.
“Name and shame” defaulter lists must be enforced strictly, not threatened and then quietly buried after political pressure. Publishing names works. Public shame motivates repayment when private collection fails.
Forensic audits must track where money actually went. Often overseas through sophisticated laundering networks. Following the money trail requires international cooperation and political will.
Court stay orders that keep willful defaulters off CIB lists must be legally closed as loopholes. Too many powerful defaulters use legal maneuvers to avoid classification while continuing to default.
The IMF’s $4.7 billion loan package comes with strict conditions: reduce NPL ratios to 10% for state banks and 5% for private banks by June 2026. Also full implementation of Basel III capital standards and IFRS-9 accounting for loan loss provisions. Compliance will require genuine reform, not cosmetic changes.
Stronger Recovery and Legal Systems
Money Loan Courts need more resources to resolve cases faster than current years-long backlogs. Judges, staff, court buildings, everything is underfunded relative to caseload.
The new Insolvency and Bankruptcy Ordinance 2025 might offer structured relief for genuine business failures. It provides a legal framework for restructuring and liquidation that protects honest but failed entrepreneurs while preserving maximum asset value for creditors.
Asset seizure and auction processes must be transparent, quick, and result in fair market prices. Current auctions often suffer from information asymmetry and insider manipulation.
Some countries successfully sold NPL portfolios to specialist recovery firms, cleaning bank books rapidly. Asset Management Companies buy bad loans at discount, freeing banks to focus on new lending while specialists handle recovery.
Learning From Countries That Solved This
South Korea created centralized asset management companies after their 1997 crisis. KAMCO (Korea Asset Management Corporation) took bad loans off bank balance sheets, recovered what they could, and allowed banks to restart lending quickly.
Thailand implemented strict governance reforms and fast-track legal procedures for recovery actions after the Asian Financial Crisis. Their NPL ratio dropped from over 40% to single digits within five years through aggressive action.
Malaysia enforced genuine consequences for willful defaulters while protecting honest distressed borrowers carefully. They distinguished between can’t pay and won’t pay, offering restructuring to the former and prosecution to the latter.
Common thread across all successful recoveries: political will to actually punish powerful defaulters, not just announce reforms. Without that, technical solutions fail.
The Asian Development Bank analysis of Bangladesh’s NPL crisis provides detailed international comparisons and policy recommendations based on regional experience.
What You Can Do as Citizen and Customer
Stop banking with institutions notorious for corruption scandals. Vote with your wallet today. Move deposits to foreign banks or well-managed private banks with low NPL ratios.
Demand transparency by actually reading the financial summaries banks must publish quarterly. These are publicly available. Most people never look.
Support political reforms promising strict legal action against financial crimes, not just talk. When politicians campaign, ask specifically about NPL recovery and defaulter prosecution plans.
Share accurate NPL information in your community to combat misinformation and build pressure. Most people don’t understand how NPLs directly affect their daily lives. Education creates accountability.
Your Move Today: Borrower, Saver, or Concerned Citizen
If You’re a Borrower Currently Struggling
Call your bank before day 90. Not on day 91. Before.
Bring a realistic repayment plan with supporting documents showing exactly why you’re struggling and exactly how you’ll recover. Honesty works better than excuses.
Ask for clear restructuring terms in writing, not vague promises that just reset the clock without solving underlying problems. Get everything documented and signed.
Keep detailed proof of all payments, messages, and agreements in one organized folder. When disputes arise, documentation determines outcomes.
Early honest conversation saves your credit score, your collateral, and your future borrowing ability. The shame of calling feels terrible. The consequences of not calling are worse.
If You’re a Depositor or Investor Right Now
Search online for your bank’s latest NPL ratio, provisioning coverage ratio, and capital adequacy ratio. Bangladesh Bank publishes quarterly financial stability reports with bank-by-bank data.
Compare across bank types: state-owned banks average 44% NPLs, private commercial banks around 33%, Islamic banks vary widely, foreign banks stay around 6%. Those differences matter enormously for your deposit safety.
Consider diversifying deposits across multiple banks if your total exceeds deposit insurance limits. Currently Tk 1 lakh per depositor per bank is insured. Above that, you bear the risk.
When alarming headlines appear, pause and check the date, definition, and denominator before panicking. Not all NPL statistics are equally meaningful or current.
If You’re Trying to Understand the News
Always note the exact quarter and date in NPL reports, not just vague “this year” or “recently” references. June 2024 data is very different from December 2024 data.
Ask which definition was used: gross vs net NPL, banks only vs including NBFIs, total loans vs performing loans as denominator. These choices dramatically change the reported ratio.
Cross-check Bangladesh Bank official releases, then use news sources for context and human stories. Primary sources matter more than headlines.
One statistic with clear date and definition is worth more than ten floating unattributed numbers repeated endlessly on social media.
Your Single Most Powerful Action This Week
Look up the CAMELS rating or latest financial report of your primary savings bank online. CAMELS rates Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk.
If their NPL ratio exceeds 15%, have a serious family conversation tonight about diversifying where money sits. You worked too hard for that money to lose it through institutional failure.
Knowledge transforms you from passive victim to informed participant in your financial safety. Five minutes of research protects years of hard work.
This tiny check protects your family’s financial security and your peace of mind.
Conclusion
A non-performing loan isn’t just a banking classification on quarterly reports. It’s the moment a repayment promise stops feeling real, usually after 90 days overdue, and the bank must treat it as probable loss. In Bangladesh, the emotional whiplash comes from ratios that jumped from 6.1% success in 2011 to over 35% crisis by 2025, with different definitions showing 9.57%, 24.1%, or even higher depending on what you count and when you measure. The same borrowed billions fund both legitimate business dreams and corrupt political patronage, and ordinary savers pay the price through higher rates, frozen credit, and eroded trust.
Your first step today: check your bank’s latest NPL ratio online before you sleep tonight. Write down the date and definition you found. That tiny habit transforms panic into clarity, and clarity into power. We didn’t create this crisis, but we can refuse to stay helpless victims of it. Knowledge, action, and demanding accountability, that’s how broken systems get fixed by people who care enough to understand first.
Non Performing Loan Ratio (FAQs)
How does Bangladesh Bank classify non-performing loans?
Yes, Bangladesh Bank uses a three-tier system. Loans overdue 3 to 6 months become substandard, requiring 20% provisioning. Overdue 6 to 12 months become doubtful, requiring 50% provisions. Over 12 months become bad or loss loans, requiring 100% provisioning. This classification determines both recovery prospects and regulatory capital impact.
What is the difference between substandard, doubtful, and bad loss loans?
Yes, the difference is time and recovery probability. Substandard loans are 3 to 6 months overdue with moderate recovery chances through negotiation or legal action. Doubtful loans sit at 6 to 12 months overdue with low recovery probability. Bad or loss loans exceed 12 months overdue and are essentially unrecoverable, though legal pursuit may continue. Provisioning requirements jump from 20% to 50% to 100% across these categories.
How long does it take for a loan to become non-performing in Bangladesh?
No, it doesn’t happen overnight. Exactly 90 days of continuous payment default triggers NPL classification. From April 1, 2025, Bangladesh Bank tightened rules so 3 to 6 months overdue becomes substandard, previously it was 3 to 9 months. The 90-day threshold is standard globally and non-negotiable under Basel III standards that Bangladesh is implementing under IMF conditions.
What are the consequences of having a non-performing loan?
Yes, consequences are severe and long-lasting. Your credit score gets destroyed for 5 to 7 years on CIB reports, blocking all future loans across all banks. Collateral can be seized and auctioned after 90 days, often at below-market prices. If classified as willful defaulter under Bangladesh Bank’s March 2024 Circular No-06, you face travel bans, business license revocations, and potential criminal prosecution. Interest continues accumulating even during default.
Can a non-performing loan be recovered?
Yes, but it’s extremely difficult and slow in Bangladesh. Banks pursue recovery through Money Loan Courts, which currently have 72,543 pending cases worth Tk 1.78 trillion. Court processes take years due to backlogs and delay tactics. Banks may negotiate restructuring for genuinely distressed borrowers, requiring full disclosure of financial condition and realistic repayment plans. Asset seizure and auction remains primary recovery method, though often recovers only 30% to 60% of original loan value due to distress pricing and corruption.