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Illustration of a hand holding a money bag marked with the taka sign.
Under the guidelines for banks, borrowers must withdraw pending writ petitions and other cases filed against the government, Bangladesh Bank or the concerned bank and submit affidavits before their applications for policy support can be considered. However, there is no provision requiring banks to provide written assurance of support before borrowers withdraw their cases.
In contrast, finance companies can first assess a borrower's application and business prospects and issue a letter of in-principle consent if the proposal is considered satisfactory. Borrowers can then withdraw their cases based on that written consent. The guidelines also stipulate that the approved terms of policy support or incentives cannot be changed after the affidavit is submitted.
The difference has raised concerns that borrowers facing similar financial difficulties may be subject to unequal levels of uncertainty, depending on whether their loans are held by banks or finance companies.
Experts say initiatives to recover defaulted loans and reduce the backlog of court cases are necessary. However, they warn that requiring borrowers to withdraw legal cases without prior written assurance of support could expose them to additional risks. Such uncertainty could also undermine efforts to reopen struggling industrial units, preserve jobs and bring stalled funds back into the economy.
Loan recovery litigation has long been a major challenge for Bangladesh's financial sector. According to an editorial citing data from the Task Force on Economic Reforms, more than Tk 178,000 crore was tied up in over 72,500 cases pending before money loan courts as of February 2024.
The prolonged suspension of proceedings by higher courts has also contributed to delays in resolving loan disputes. One example is the loan recovery case involving Janata Bank and Green Tanneries. The dispute over a Tk 18 crore loan, which began in 2004, remained unresolved in 2026. The case had been heard 104 times over 22 years. After the matter was challenged in the High Court in 2014, a six-month stay order effectively continued for nearly eight years. As a result, the bank failed to recover its dues, while the business was also unable to make the expected recovery.
According to Bangladesh Bank data, bank loans covered by court stay orders totalled Tk 182,419 crore at the end of 2025.
To reduce defaulted loans and recover funds trapped in litigation, the central bank has introduced several policy support measures, including one-time settlements, loan restructuring and rescheduling. However, some borrowers have continued legal proceedings against the government, Bangladesh Bank or the concerned banks while simultaneously applying for policy benefits.
The central bank issued new instructions to address this practice and prevent borrowers from pursuing legal action against the relevant authorities while seeking policy concessions.
On July 29, 2026, the Banking Regulation and Policy Department-1 of Bangladesh Bank issued Circular Letter No. 25 under Section 45 of the Bank Company Act, 1991. The circular states that borrowers seeking government or Bangladesh Bank incentive packages or other policy support must withdraw pending writ petitions and other cases filed against the government, the central bank or the relevant bank.
After withdrawing the cases, borrowers must submit a list of the relevant proceedings. They must also provide an affidavit on non-judicial stamp paper confirming that no cases filed by them against the government, Bangladesh Bank or the concerned bank remain pending.
This means borrowers must withdraw their legal challenges before their applications enter the policy support consideration process. However, the circular does not specify how quickly applications must be decided, the detailed criteria for approving support or what recourse borrowers will have if their applications are rejected.
The absence of these safeguards has raised concerns about uncertainty. In particular, questions remain over the legal position of borrowers who withdraw their cases but are subsequently found ineligible for policy support.
Bangladesh Bank has adopted a comparatively different approach for finance companies.
On August 17, 2026, its Finance Company Regulation and Policy Department issued Circular Letter No. 16 under Section 41 of the Finance Company Act, 2023. The objective is also to prevent borrowers from continuing legal proceedings against relevant institutions while receiving policy support.
However, the process is divided into several stages. First, the finance company evaluates the borrower's application and assesses the business's future prospects. If the proposal is considered satisfactory, the company issues a letter of in-principle consent. The borrower can then withdraw the relevant cases and submit the required affidavit and list of proceedings.
Another important provision stipulates that the terms of approved policy support or incentives cannot be changed after the affidavit is received. This gives borrowers a written basis for the proposed assistance before they abandon their legal proceedings.
The key difference between the two circulars is the sequence of procedures. For bank borrowers, applications may be evaluated after cases have been withdrawn. For finance company borrowers, applications are assessed and in-principle consent is issued before the withdrawal of cases. Consequently, bank borrowers face greater uncertainty during the process.
Managing Director of Shahjalal Islami Bank Mosleh Uddin Ahmed said the central bank's decision was appropriate because banks are often compelled to file cases after failing to recover loans for years.
"If they are given additional concessions now, defaulting borrowers may delay repayment to banks even further. If they want to continue doing business, they must come to the bank," he said.
Mosleh Uddin Ahmed added that the central bank might have considered allowing some flexibility for finance companies because giving financially distressed institutions additional time could help them recover at least part of their outstanding loans.
Dr Md Ejazul Islam, Director General of the Bangladesh Institute of Bank Management (BIBM), said the primary objective of the two circulars was to recover outstanding loans. He noted that separate circulars could be issued for banks and financial institutions, adding that the distinction might reflect the different nature of their financing activities, as banks provide long-term financing.
He also pointed to the difference in the dates when the two circulars were issued. According to him, when the first circular was introduced, the authorities may have intended to discuss loan-related matters only after borrowers withdrew their cases and submitted affidavits. By the time the circular for finance companies was issued, the process may have been relaxed to some extent.
Dr Ejazul Islam said Bangladesh Bank could reconsider the matter if the business community raised objections or expressed concerns.
Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan said the two types of institutions were different and could therefore be subject to separate circulars. However, he said he was unaware of the specific reasons for prescribing different procedures for borrowers facing similar loan default situations.
He said he would speak with the Banking Regulation and Policy Department and provide further information.
Meanwhile, Bangladesh Bank had announced an incentive fund of Tk 60,000 crore to stimulate economic activity and increase the flow of funds to the industrial sector. Under the scheme, industrial entrepreneurs were expected to receive loans at interest rates of up to 7 per cent, with a target of creating 2.5 million jobs.
Despite the announcement, however, the industrial sector continues to face difficulties, including energy shortages and other operational challenges. Four months after the package was announced, the pace of fund disbursement remained below expectations, prompting the central bank to explore relaxing conditions and reducing interest rates to accelerate lending.
Against this backdrop, the different procedures for bank and finance company borrowers have become a subject of renewed debate. If the objective of policy support is not only to recover defaulted loans but also to revive businesses and protect employment, a key question remains whether bank borrowers will receive safeguards similar to the written in-principle consent available to borrowers of finance companies.
https://thedailyexpress.news/news/business/bangladesh-bank-adopts-different-policies-for-banks-and-finance-companies-in-loan-recovery