Sun Nov 30, 2025 02:12 AM
Last update on: Sun Nov 30, 2025 02:20 AM
BB governor says as businesses demand action
Star Business Report
Sun Nov 30, 2025 02:12 AM Last update on: Sun Nov 30, 2025 02:20 AM
Bangladesh Bank Governor Ahsan H Mansur speaks at the inaugural session of the “Fourth Bangladesh Economic Conference 2025”, organised by Bangla daily the Bonik Barta, at the Pan Pacific Sonargaon in Dhaka yesterday. Photo: Collected
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Bangladesh Bank Governor Ahsan H Mansur speaks at the inaugural session of the “Fourth Bangladesh Economic Conference 2025”, organised by Bangla daily the Bonik Barta, at the Pan Pacific Sonargaon in Dhaka yesterday. Photo: Collected
Bangladesh’s banking sector is staring at a long climb out of its deepening bad-loan crisis, with Bangladesh Bank Governor Ahsan H Mansur warning yesterday that it may take five to ten years for soaring non-performing loans (NPLs) to return to safer territory, despite expectations that they will stabilise at the current level.
However, business leaders, already weighed down with high borrowing costs, want immediate actions to put a stop to the surge in toxic loans, saying they fear the NPLs will continue to rise, impacting investment.
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According to the central bank, defaulted loans stood at Tk 6.44 lakh crore at the end of September this year, nearly 36 percent of total disbursed loans. Net NPLs also jumped to 26.4 percent, or Tk 4.15 lakh crore, as of September. A year earlier, bad loans accounted for 16.93 percent of outstanding loans.
“A default rate exceeding one-third of total loans poses a severe challenge. The true scale of bad loans is now becoming apparent due to stricter loan classification rules,” Mansur told business leaders at the Fourth Bangladesh Economic Conference 2025, organised by the Bonik Barta in Dhaka.
With banks effectively operating on only two-thirds of their asset quality intact, the governor described the crisis as a structural risk that cannot be resolved quickly.
“We expect NPLs to stabilise at this level. After that, a gradual decline may begin. But a full recovery will require five to ten years of sustained reform and discipline,” he said.
Business leaders, however, were sceptical about any stabilisation without a crackdown on serial defaulters.
“If the average NPL is around 35 percent, then where has this money gone? Strict action against defaulters is necessary,” said AK Azad, chairman of Ha-Meem Group.
With such a large share of loans outside the system, he said, “running the state will be impossible, and GDP will decline even further.”
The next government, he stressed, must identify the borrowers behind the bad loans and bring them under the law.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said they believe the NPLs may rise in the future.
“Steps must be taken to prevent any further increase. Industries should keep running so banks can get returns; if they get shut by dint of the law, banks get nothing,” he said.
Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry, echoed the concern. “When will this upward trend be checked, and when will it start moving in the right direction?”
‘FIX LENDING RATE 2-3% BELOW TREASURY BOND YIELDS’
Industry representatives also pressed the central bank to ease monetary policy, arguing that high interest rates are choking investment at a time of already weakened demand.
“These higher interest rates are leaving the private sector unable to borrow, which is constraining the private sector’s expansion,” Ha-Meem Group’s Azad, one of Bangladesh’s leading exporters.
Echoing the same, Transcom Group CEO Simeen Rahman said the combined effect of inflation and elevated lending rates had slowed growth and consumer spending. “Our economy is going through challenges both in terms of growth and consumer spending.”
GPH Group Chairman Mohammad Jahangir Alam noted that Bangladesh’s 10 percent policy rate contrasts with the lower rates in competing countries, except Pakistan.
“If the policy rate comes down, lending rates will also fall and businesses will get some relief,” said Alam, also president of Bangladesh Steel Manufacturers Association.
He also pointed to treasury bonds yielding 11–12 percent, which have become more attractive to banks than lending to businesses.
“As a result, banks are choosing the risk-free option of investing in treasury bonds instead of supporting industries. That is why we are facing a credit shortage,” he said.
He urged the central bank to reduce both the policy rate and the yield on treasury bonds, saying businesses could survive if bank loans were priced 2–3 percent below bond returns.
Governor Mansur acknowledged the strain caused by the high interest rate but said rate cuts would only follow a sustained drop in inflation.
“The interest rate is certainly high. But globally, there is usually a gap of at least 2–3 percent between the policy rate and inflation,” he said.
“Our inflation rate is still 8.2 percent. I will lower the interest rate once it comes down,” he said.
However, he also criticised the government’s policy. “Inflation could have been lower, but the government’s policy failures are behind it not falling further.”
Turning to external balances, the governor said foreign exchange conditions had improved ahead of Ramadan.
“Last year’s Ramadan was the most difficult period for managing foreign exchange liquidity. But this year, we are not seeing signs of stress,” he said.
He said all import LCs for essentials had been opened, while LC openings across product categories had risen sharply from a year earlier.
“Imports have increased, showing double-digit growth this month. Yet even then, there is no exchange rate pressure now,” he said.
Bangladesh Institute of Development Studies Director General AK Enamul Haque, City Bank Managing Director and CEO Masrur Arefin also spoke at the event.