B Mirror Report: The central bank has published its latest banking update report, revealing a sharp rise in defaulted loans in the country’s banking sector. By the end of the December quarter, the default rate stood at 31.20%, significantly higher than 19.90% recorded during the same period a year earlier.

In monetary terms, the current default rate translates to approximately Tk 5,54,486 crore in non-performing loans.

According to Bangladesh Bank data, the surge is largely attributed to the implementation of international standards for loan classification from 2025. Under the revised rules, loans are now classified as defaulted if they remain unpaid for more than 90 days, compared to the previous 180-day threshold. This stricter classification has contributed to the increase in default figures.

A senior central bank official said the 90-day rule has led to a rise in reported non-performing loans since last year. However, due to several policy support measures introduced toward the end of 2025, defaulted loans declined slightly in the December quarter compared to September, when the rate stood at 36.30%.

One of the key measures allows banks to write off bad loans earlier. Previously, loans had to remain classified as bad for two consecutive years before being written off, but the new framework enables faster write-offs.

Officials also noted that many banks have restructured their defaulted loans following policy support, removing a portion from the default list. Without these adjustments, the December figures would have been even higher.

Bankers said the rising trend over the past one and a half years reflects the exposure of previously hidden bad loans, as the practice of showing loans as regular without actual repayment has been curtailed.

They added that foreign audit firms have reviewed the loan portfolios of several banks, uncovering irregularities. The situation is particularly evident in five Islamic banks that have recently been consolidated into a single entity, where defaulted loans have surged sharply.

According to bankers, the current scenario is the result of years of irregularities, fraud, and corruption in the banking sector over the past decade and a half. Large business groups, including S Alam Group, Beximco Group, Nasa Group, Bismillah Group, and Hall-Mark Group, along with past scandals such as BASIC Bank, have played a role in the accumulation of bad loans.

Islamic banks have been the hardest hit, although several conventional banks have also faced significant loan irregularities.