Over the past decade and a half, Janata Bank PLC has become one of the most distressed institutions under the ousted Awami League government. More than three-quarters of the loans it issued are now in default. The state-owned bank is facing a severe cash shortage and recorded more than BDT 30 billion in net losses in 2024 alone. With virtually no capacity to lend, the bank’s workforce of more than 14,000 personnel has little to do. Some employees handle daily transactions and deposits, but many spend long stretches with almost no work.

Basic Bank, which collapsed after large-scale looting in the years after 2009, has posted BDT 55.13 billion in net losses over the past decade. Nearly 70 percent of its loans are nonperforming. More than two thousand employees still work at the bank, yet most have had little meaningful work for more than a decade. As time passes, its financial condition continues to deteriorate, and the losses grow deeper.

Bangladesh currently has nine state-owned scheduled banks. Sonali, Janata, Agrani, Rupali, Basic, and Bangladesh Development Bank (BDBL) operate as commercial banks. Three others are specialized institutions: Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB), and Probashi Kallyan Bank (PKB). Beyond these, there are several non-scheduled banks, including Ansar-VDP Unnayan Bank, Karmasangsthan Bank, and Palli Sanchay Bank. According to Bangladesh Bank, nearly eighty thousand officers and employees work across these state-owned banks. The institutions are under pressure from a surge in defaulted loans, shortages of capital and provisions, liquidity constraints, and weak management. Most now face an extremely fragile situation. Many employees spend hours idle, and workplace factions are growing as workloads shrink.

Officials say the major responsibilities of the four largest state-owned banks once included processing government salaries, pensions, savings certificates, and treasury receipts, opening letters of credit for government imports, and collecting payments for electricity, gas, and other services. Technological changes have moved much of that work online. Private banks have also entered the business of handling government receipts and selling savings certificates. With development projects stalled, there are few import letters of credit to process. As a result, the responsibilities and work of state-owned banks have narrowed. With lending now nearly halted, many employees in these banks have almost nothing to do. Senior officials at several institutions say that some staff are essentially “collecting salaries while sitting idle.”

Mohammad Muslim Chowdhury, chairman of Sonali Bank, believes the government no longer needs to keep so many banks under state ownership. He told Bonik Barta that many government functions, including challan collection, treasury management, and payments for salaries and pensions, can now be handled online. Private banks also collect challans. As a result, he said, the government’s dependence on state-owned banks has decreased significantly. “I think two or three state banks, including Sonali, are enough. Among them, the Krishi Bank can focus solely on lending to farmers,” he said.

Chowdhury added, “The state-owned commercial banks were converted into limited companies in 2007. The goal was to list them on the capital market and gradually reduce government ownership. But except for Rupali Bank, none of the banks were able to go public. And even after listing, Rupali Bank saw little improvement in its overall performance. If the country wants to fix the banking sector, it has to pursue effective reforms across all areas. The kind of planning and action needed for that has not been visible over the past year.”

In the post-2024 uprising period, Bangladesh Bank Governor Dr. Ahsan H Mansur introduced several visible reform initiatives in private banks. He dissolved the boards of at least 14 private banks and brought major changes to their management. Five Shariah-based banks are now in the final stages of being merged into a new entity. But compared with the reform drive in private banks, there has been little initiative to reform state-owned banks. The Financial Institutions Division (FID) of the Ministry of Finance oversees these banks. Since August 5, 2024, the only changes have been at the board and managing director levels. No special audit has been conducted to assess how much financial loss or embezzlement occurred in these banks during the tenure of ousted Prime Minister Sheikh Hasina.

The chairmen, directors, and managing directors of state-owned banks are appointed by the FID. For more than a decade and a half, these appointments have been plagued by allegations of widespread irregularities and corruption. Over the past year, there has been no effort to identify the officials involved in those practices. Many bureaucrats also sat on the banks’ boards themselves. And no steps have been taken to examine their responsibility or involvement in the irregularities committed under their watch.

According to data from the central bank, nonperforming loans at the four major state-owned banks — Sonali, Janata, Agrani, and Rupali — reached BDT 1.46 trillion by the end of June 2025. That means 48.10 percent of their outstanding loans are now in default. The banks have also failed to maintain required provisions against these bad loans. Except for Sonali Bank, the other three have a combined provisioning shortfall of BDT 680.36 billion. In the same six-month period, Janata Bank posted a net loss of BDT 20.72 billion. Outside these four banks, Basic Bank’s losses and financial troubles run even deeper. Its nonperforming loans stand at BDT 89.30 billion, or 69.20 percent of its total outstanding loans. At Bangladesh Development Bank (BDBL), 42.10 percent of loans have turned nonperforming.

The three specialized banks are in similarly precarious condition. Bangladesh Krishi Bank (BKB) has been posting losses year after year. Over the past six fiscal years alone, it has recorded nearly BDT 191 billion in net losses. Its capital shortfall has climbed to BDT 292.07 billion. The bank’s default loan situation is also alarming. By the end of June, 49.44 percent of its total loans were in default, amounting to BDT 175.38 billion, according to internal documents. Rajshahi Krishi Unnayan Bank (RAKUB) faces almost the same picture. More than 22 percent of its loans are now nonperforming, and its capital shortfall has reached BDT 26.20 billion.

The decline in regular work for state-owned bank employees is also evident in loan disbursement trends. Central bank data show that outstanding loans at the four major state-owned banks totaled around BDT 3.12 trillion at the end of December 2024. Over the next six months, instead of increasing, that figure actually fell by BDT 83.78 billion. By the end of June 2025, outstanding loans at those banks had dropped to BDT 3.04 trillion. Alongside these four banks, Basic Bank, BDBL, BKB, RAKUB, and PKB also saw their loan portfolios shrink rather than expand.

A senior official at state-owned Rupali Bank told Bonik Barta, “Employees at state-owned banks have little meaningful work left beyond identifying themselves as government employees. The economic slowdown has already reduced demand for bank loans. But even if demand returns, most of these banks lack the liquidity to lend. Only the front-line cash counter staff at branches have some work to do. The rest come to the bank and spend their time chatting,” he said.

Sonali Bank is the largest of the state-owned banks. As of June 30, its deposits stood at BDT 1.69 trillion, excluding interbank deposits. Despite holding such a large volume of deposits, its loan portfolio amounted to only BDT 897.78 billion (excluding staff loans). In December 2024, that figure had been BDT 991.97 billion. This means Sonali’s outstanding loans have fallen by BDT 94.19 billion rather than increasing. The bank’s advances-to-deposit ratio (ADR) now stands at only 57 percent.

In the first half of 2025, from January through June, Sonali Bank reported an operating profit of BDT 37.54 billion. Most of that income came from the government treasury. By investing in high-interest treasury bills and bonds, the bank earned BDT 44.29 billion in six months, while its interest income from lending totaled only BDT 5.75 billion. Among state-owned banks, Sonali has a somewhat lower share of nonperforming loans. By the end of June, its nonperforming loans amounted to BDT 198.17 billion, or 20.13 percent of its total loans.

Even so, the bank’s Managing Director Md Shawkat Ali Khan told Bonik Barta, “If you look only at the loan portfolio, it may seem that we are not lending at all. But in reality, although we are not issuing large loans, we have extended many loans to the SME sector. Other financial indicators for the bank are also improving.”

Janata Bank, however, has faced the most severe looting among the state-owned banks over the past decade and a half. Several major business groups, including Beximco, S Alam, Bashundhara, AnonTex, and Crescent, borrowed more than BDT 600 billion from the bank. Much of that lending has since turned nonperforming. By the end of June, Janata’s nonperforming loans had reached BDT 721.07 billion. A total of 75.91 percent of its outstanding loans are now classified as nonperforming. Its provisioning shortfall stands at BDT 458.96 billion. In the first half of 2025, the bank posted a loss of BDT 20.72 billion. Facing acute liquidity crisis, Janata Bank is now offering term deposits at 11 to 13 percent interest. Sources say these high-cost deposits are likely to push the bank into even deeper trouble over the long term.

Janata Bank’s managing director, Md Mazibur Rahman, also acknowledged the severity of the situation. “When I took charge, I found a devastated bank,” he said. “I am trying to bring it back on its feet. Despite the negative reputation, deposits have increased by BDT 160 billion. The bank had a large volume of outstanding LC liabilities, which have now been settled. Under policy rules, no officer can remain in the same branch or department for more than three years, but many officers at Janata had stayed in the same post for seven or eight. I have transferred those officers. Even so, we are not in a position to issue new loans because of the bank’s financial condition.”

Agrani Bank, another major state-owned bank, is in similarly weak financial shape. In the first six months of this year, its outstanding loans remained stuck at BDT 720 billion. Of that, BDT 322.57 billion has turned nonperforming, roughly 41 percent of its total loans. The bank’s provisioning shortfall has reached BDT 113.79 billion.

After the interim government took office, Syed Abu Naser Bukhtear Ahmed was appointed chairman of Agrani Bank. He previously served as its managing director from 2004 to March 2010. Discussing the bank’s current state, he told Bonik Barta, “The crisis at Agrani Bank is beyond imagination. The institution has been completely destroyed after 2010. When I took over as chairman, I found that nearly BDT 25 billion had been debited from the bank’s nostro accounts, but the corresponding customer accounts had not been debited. That amount had been left overdue for 735 days. In my entire banking career, I have never heard of such large-scale fraud.”

He added, “Over the past decade and a half, only people aligned with the Awami League received loans from Agrani Bank. Many loans were issued through forgery and fraudulent practices. Those loans are no longer being repaid. The bank’s current nonperforming loan ratio is around 40 percent. Yet in 2010, when I completed my tenure as the top executive, Agrani’s nonperforming loans were only BDT 21.02 billion, or less than 10 percent. Such a strong bank has been ruined. As chairman, I am now trying to reduce nonperforming loans through cash recovery, rescheduling, and other processes allowed by law.”

Rupali Bank, another major state-owned institution, is also at the bottom of nearly every financial indicator. In the first six months of 2025, its outstanding loans did not grow; instead, they fell by BDT 10 billion. By the end of June, the bank’s loan portfolio stood at BDT 465.21 billion, of which BDT 221.79 billion had turned nonperforming. The bank, the only state-owned institution listed on the stock market, now has a nonperforming loan ratio of 44 percent. Its provisioning shortfall has reached BDT 107.61 billion.

Kazi Md Wahidul Islam, the bank’s managing director, said, “We are selecting good clients before disbursing loans. That is why loan growth is somewhat low. The country’s economic situation is also a factor.”

The Probashi Kallyan Bank (PKB) was created in 2010 by the government of former prime minister Sheikh Hasina to provide loans to Bangladeshi workers abroad. Yet the institution has failed to grow even after a decade and a half. Before operations began, the bank’s recruitment process was mired in serious irregularities, leading to the appointment of unqualified staff. That burden still has not been overcome. By the last fiscal year, the bank held deposits of only BDT 1.72 billion, despite disbursing nearly BDT 25 billion in loans during the same period.

Bangladesh Krishi Bank was established in 1973 to provide loans to farmers. In 1986, then-president Hussain Muhammad Ershad split it and formed the Rajshahi Krishi Unnayan Bank, or RAKUB, using the Rajshahi-region branches. Similar to Krishi Bank, RAKUB is also in a fragile financial state. For several years, officials have discussed merging the two specialized institutions, but the process has not started because of bureaucratic complications and indecision.

Several senior officials of the two banks told Bonik Barta that the easiest task for the interim government would have been merging BKB and RAKUB to create a stronger institution for farmers. No such effort has been made. Bureaucrats do not want fewer banks, they said, because more banks mean more positions for managing directors and other top executives, along with more deputy managing directors and general managers. Promotions and appointments to those posts are controlled by the Financial Institutions Division (FID). Many bureaucrats oppose a merger because fewer positions would also reduce opportunities for irregularities.

Salehuddin Ahmed, the finance adviser, acknowledged that the government has not been able to devote sufficient attention to reforming state-owned banks. Speaking to Bonik Barta, he said, “Because of becoming busy with the NBR reform program, it was not possible to pay attention to the reform of state-owned banks. Even so, we have moved forward with amendments to the Bank Company Act. The initiative to merge five weak Shariah-based banks into a single institution is now in its final stage. In the next two or three months, we will turn our attention to reforming the state-owned banks.”