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The number of classified loan accounts in Bangladesh's banking sector has more than doubled over the past year, reaching nearly 4.58 million by the end of March 2026, according to the latest Bangladesh Bank report.
The central bank's "Banking Sector Update" said the number of classified loan accounts involving loans of up to Tk 1 crore rose to 4.543 million, up sharply from 2.163 million a year earlier.
Bangladesh Bank said the surge points to growing financial stress at the retail level, driven by rising living costs, increasing household debt, slowing SME activity, and weakening repayment capacity among farmers and small traders.
The report also showed that the overall non-performing loan (NPL) ratio climbed to 32.7 percent of total outstanding loans in March 2026, compared with 24.6 percent a year earlier, describing the trend as alarming.
According to the central bank, classified loans increased across state-owned, private and Islamic banks between March 2025 and March 2026, while foreign banks and banks established after 2016 continued to maintain relatively low default levels. The report noted that Islamic and state-owned banks remain particularly vulnerable because of weak credit discipline and possible governance shortcomings.
Sector-wise, the cottage industry recorded the highest classified loan ratio at 52.8 percent. The combined CMSME and informal sectors account for 21.4 percent of total lending but represent 34.2 percent of classified loans, highlighting disproportionate credit quality concerns.
Despite this, the large industry segment remains the biggest contributor to non-performing loans, accounting for 58.7 percent of total lending and 39 percent of classified loans.
Md Mahiul Islam, Deputy Managing Director and Head of Retail Banking at BRAC Bank, said inadequate credit risk assessment may have contributed to the sharp rise in defaults among loans of up to Tk 1 crore. He added that high inflation and declining purchasing power have also weakened borrowers' repayment capacity.
The report further noted that classified loan ratios increased across all major sectors, including industry, trade and agriculture. Bangladesh Bank said the country's banking sector crisis is being driven primarily by willful defaulters and large corporate groups, rather than by small individual borrowers.
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