One-third of the banking sector’s loan portfolio in Bangladesh is now classified, highlighting the continuing weakness in loan recovery and the deteriorating quality of bank assets.

Classified loans in the banking sector rose to 606,555 crore taka as of June 30, 2026, up from 588,704 crore taka three months earlier, according to the latest data published by the central bank on Wednesday.

The volume of classified loans increased by 17,851 crore taka, or around 3 percent, during the April-June quarter.

As a result, the ratio of classified loans to total outstanding loans climbed to 32.78 percent in June from 32.26 percent in March, an increase of 0.52 percentage points.

The latest figures mean that nearly one in every three taka lent by the country’s banks is now classified, underscoring the scale of the sector’s loan-recovery problem.

The deterioration comes despite various measures taken by the authorities to strengthen loan recovery and address weaknesses in the banking sector.

The persistent rise in classified loans is putting growing pressure on banks’ profitability, capital adequacy and ability to extend new credit.

Bangladesh’s banking sector has been grappling with a high volume of defaulted and distressed loans. The level of classified lending has continued to rise as banks tighten their recognition of problem assets and borrowers struggle to service their debts.

The latest quarterly increase also suggests that stressed loans remain deeply entrenched in the banking system, even as regulators pursue reforms aimed at improving governance, loan recovery and financial discipline.

The continued accumulation of classified loans could further constrain banks’ ability to provide fresh credit to businesses and households. It could also increase provisioning requirements and place additional pressure on banks’ overall financial health.