The early morning rising bell at Mirzapur Cadet College left little room for hesitation. At precisely 05:15 am, its sharp, metallic clang shattered the dawn, forcing every cadet out of bed and into the crisp morning air. It was an unyielding mechanism designed to enforce discipline and prevent inertia inside the mind of all the cadets like me.
Decades later, as Bangladesh’s financial architecture creaks under the weight of historic mismanagement, it feels like that ringing an institutional alarm bell on a national scale is painfully overdue. The country’s banking system faces a reckoning that requires an equally immediate, uncompromising awakening like the way that cadet college bell used to awaken us from our slumber.
According to recent international financial data, Bangladesh has earned an enviable distinction for all the wrong reasons. The nation’s non-performing loan (NPL) ratio has surged to approximately 30%, placing it second globally, trailed only by war-torn Ukraine.
Across South Asia, no other member state of the South Asian Association for Regional Cooperation, save for Pakistan in fourteenth place, features in the global top twenty for distressed debt. It is a damning indictment. What should be the engine of national growth has instead become a repository for toxic assets.
At its core, a non-performing loan represents a fundamental breakdown of the credit contract. When a borrower ceases principal or interest payments, the underlying asset decays, threatening the solvency of the institution holding it. In a healthy economy, NPL ratios remain well within single digits.
In Bangladesh, however, the balance sheets of state-owned commercial banks present a horror story, with distressed loans hovering near 50%. Specialized institutions fare little better, while private commercial banks report bad loans nearing 30%.
Only foreign commercial banks, bound by rigorous international credit appraisals and unyielding corporate governance, maintain a clean bill of health with NPL ratios around 1%.
This stark contrast exposes the root of the crisis…systemic rot born of political patronage, institutional cowardice, and regulatory failure. For seventeen years, a cozy alliance of politically connected oligarchs, compliant bank boards, and silent auditors allowed bad practices to proliferate.
Loans were granted without adequate collateral, risk assessments were bypassed, and funds were routinely diverted away from productive enterprises. When distress inevitably surfaced, the system responded not with liquidation, but with perpetual rescheduling, paper write-offs, and regulatory forbearance.
A network of flatterers insisted the economy was on the correct trajectory, promising a future akin to Singapore while the foundations were systematically hollowed out.
The human cost of this institutional decay is visible on the streets of Dhaka, where modest depositors gather outside struggling institutions, begging for access to their life savings. While bank executives host lavish annual general meetings, ordinary citizens bear the cost of reckless credit expansion. The economic consequences are severe.
A banking sector burdened by bad debt is forced to raise interest rates on legitimate borrowers, chilling private investment, stifling small enterprises, and dampening foreign direct investment. When the state steps in to recapitalize failing banks, public funds are diverted from essential healthcare, education, and infrastructure.
The legal and social asymmetry of this system is stark. Consider two contrasting debtors within Bangladesh’s credit landscape. On one end is Dobir, a small-scale farmer who borrows fifty thousand taka to purchase a cow, only to lose his livelihood when seasonal floods drown the animal. Incapable of servicing his debt, Dobir faces swift legal action, arrest, and public humiliation.
On the other end stands the well-connected tycoon, whose defaulted loans run into thousands of crores. Instead of facing handcuffs, this willful defaulter moves freely across international borders in private jets, courted by politicians and social elites alike. Institutions hesitate to classify his debts, fearing the leverage he wields.
A financial regime that punishes the vulnerable while insulating the powerful undermines the rule of law and destroys public trust in the state.
Addressing a crisis of this magnitude demands structural reform rather than superficial adjustments. Bangladesh Bank has initiated welcome steps, including board restructurings, enhanced risk-based supervision, and new legislative frameworks such as the Bank Resolution Act and the Distressed Asset Management Act.
Yet policies on paper mean little without the institutional courage to enforce them.
The nation need not look far for proven blueprints. Jurisdictions such as Singapore, South Korea, and Japan built robust financial sectors by combining regulatory independence with swift judicial enforcement.
In Singapore, efficient bankruptcy proceedings ensure rapid asset liquidation, while centralized credit registries permanently restrict delinquent borrowers from future leverage. South Korea utilized specialized asset management corporations to purchase, aggregate, and resolve distressed loans, isolating bad assets from the broader banking system and forcing corporate restructuring.
Bangladesh must adopt a similarly rigorous approach. The accumulated decay of the past seventeen years cannot be swept under the rug, nor can the public be expected to absorb endless bailouts for reckless elites.
Bank boards must be insulated from political interference, recovery departments given real legal teeth, and willful defaulters barred from public commerce and international capital flight.
The time for complacency has passed. The rising bell is ringing across Bangladesh’s financial landscape, signalling that time has run out for the architects of bad credit and loose governance.
If the central bank and the government fail to act decisively now, the country risks waking up to empty vaults, eroded capital, and an irreparable economic crisis. The alarm is sounding; the choice is whether to step up or face systemic collapse.
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Brigadier General (rtd) Munirul Islam is an ex-Director of Trust Bank PLC. In profession he is a Logistician and Procurement Specialist. He did his PhD from Jahangirnagar University. His thesis was in “Public Procurement in Bangladesh- A study in the Health Sector”.