Concerns over rising defaults at specialized banks

Bangla Press Desk:  The Ministry of Finance has expressed concern over the growing volume of non-performing loans (NPLs) at specialized banks. Due to lending beyond their designated sectors—particularly to commercial and large-scale sectors—the amount of defaulted loans at these banks has increased alarmingly. In this context, the ministry has instructed specialized banks to conduct their lending activities strictly within their respective mandates.

At a meeting held last week at the Ministry of Finance, chaired by Dr Anisuzzaman Chowdhury, Special Assistant to the Chief Adviser, the overall operations of state-owned specialized institutions—including Ansar-VDP Development Bank, Karmasangsthan Bank, Probashi Kallyan Bank, Bangladesh Krishi Bank, Bangladesh Samabaya Bank Limited, Rajshahi Krishi Unnayan Bank (RAKUB), BASIC Bank, and Bangladesh House Building Finance Corporation—were reviewed.

The meeting discussed in detail issues such as deposit mobilization, loan disbursement, capital position, agricultural and rural credit, lending to the cottage, micro, small and medium enterprise (CMSME) sector, non-performing loans, cash recovery from defaulted loans, and progress in recovering written-off loans.

According to sources, Anisuzzaman Chowdhury said at the meeting that some specialized banks are extending commercial loans beyond their designated objectives and commitments. As a large portion of these loans has turned into defaults, pressure from NPLs has increased. He urged specialized banks to refrain from such lending practices.

The meeting noted that Bangladesh Krishi Bank and BASIC Bank have comparatively higher levels of non-performing loans. In addition, compared to June 2025, defaulted loans increased by September of the same year at Rajshahi Krishi Unnayan Bank (RAKUB) and Probashi Kallyan Bank. It was also observed that loan disbursement by specialized banks and financial institutions is on an upward trend. In particular, the risk at RAKUB is increasing as loan disbursement significantly exceeds deposit collection.

Chowdhury emphasized that specialized banks and financial institutions were established under separate laws with specific mandates. Therefore, they should avoid lending to sectors that are not aligned with their founding objectives. He stressed increasing credit to the cottage, micro, small and medium enterprise (CMSME) sector, noting that borrowers in this segment are generally low-income individuals who tend to repay their loans and seek further financing. As a result, default rates in this sector are comparatively lower. Prioritizing this sector would not only reduce non-performing loans but also stimulate economic activity.

The meeting also stated that the recovery rate of written-off loans is not satisfactory and instructed bank authorities to expedite the process. In addition, banks were advised to set separate targets for recovering defaulted and written-off loans, and senior management was urged to regularly monitor recovery performance.

BP/SP