Nearly 70 percent of loans disbursed by state-owned Janata Bank have turned non-performing, dragging the lender into a capital hole equivalent to twice the construction cost of the Padma Bridge.

The bad loans total BDT 730 billion, according to Janata Bank PLC’s audited 2025 financials, and the bank has failed to set aside adequate provisions. Its actual capital shortfall at year-end reached BDT 644.06 billion.

Under the Basel III framework, Janata Bank was required to hold BDT 129.18 billion in regulatory capital. Instead, it recorded a deficit of BDT 164.84 billion. Simultaneously, the provisioning shortfall stood at BDT 559.32 billion. The audited report put Janata Bank’s actual capital shortfall at BDT 644.06 billion.

Janata Bank’s earnings have also come under severe strain after two-thirds of its disbursed loans turned non-performing. In 2025 alone, the bank lost BDT 59.03 billion on its interest operations. It now survives on receipts from government treasury bills and bonds, which generated BDT 36.65 billion last year. That was nowhere near enough: Janata Bank posted a net loss of BDT 39.31 billion for 2025, following a BDT 30.66 billion loss in 2024. Over two years, the country’s second-largest state-owned bank has swallowed a combined net loss of nearly BDT 70 billion.

Sources trace the calamity to the post-2009 period. Sheikh Hasina, the now-ousted prime minister, after assuming power in the ninth parliamentary election, stacked Janata Bank’s board with political loyalists — repeating a pattern seen across several state-owned banks. Economist Dr Abul Barkat took the chairmanship on September 9, 2009. He departed in September 2014 after two terms in the post. Throughout his tenure, leaders of the now-banned Awami League and its student front, the Chhatra League, dominated the board.

Interviews with numerous Janata Bank officials confirm that the lending abuses and corruption that took hold in 2009 persisted until the regime fell on August 5, 2024. Political calculations governed every major decision: the appointment of managing directors, staff promotions, and even loan approvals.

The consequences are stark. Virtually all of Janata Bank’s large loans have soured, and it lacks adequate collateral against them. Attempts to sell pledged assets have also drawn no buyers. That has put two-thirds of its loan book at severe risk.

The audited financial report reinforces this picture. As of December 31 last year, Janata Bank’s outstanding loans totalled BDT 1.05 trillion. Five business groups accounted for BDT 505.30 billion of that: the Beximco companies controlled by Salman F Rahman took out BDT 246.20 billion; S Alam Group BDT 110.65 billion; AnonTex BDT 80.74 billion; Crescent Group BDT 40.14 billion; and Orion BDT 27.57 billion.

Out of Beximco Group’s BDT 246.20 billion in loans, only Beximco Pharma’s BDT 4.40 billion exposure remains performing. The rest of Beximco’s debt is now non-performing, as are the loans to S Alam, AnonTex and Crescent. Orion has moved to reschedule its borrowings.

Md Majibur Rahman, Janata Bank’s managing director, said the bank is fighting to stay afloat despite the crushing weight of its losses, bad loans and capital shortfalls. “When 70 percent of a bank’s loans go bad, it’s impossible to make a profit,” he told Bonik Barta. “Janata Bank’s loans are about 70 percent non-performing now. Of the remaining 30 percent, some are staff loans at just 4 percent interest. Others we have rescheduled to keep them regular, but grace periods mean we’re collecting almost nothing from them either. Even so, we’re trying to survive by growing income from investments and commissions.”

Rahman said the bank must pay staff salaries and allowances of BDT 1.25 billion each month — a sum that is now difficult to earn. “Nearly half the bank’s loans sit with just five groups, all non-performing. Beximco and S Alam Group have gone completely silent. If we can reach a decision on those two groups, we can mount a proper recovery.”

Janata Bank held deposits of BDT 1.25 trillion at the close of 2025. The bank paid depositors BDT 88.07 billion in interest over the year. Against that, it earned just BDT 29.03 billion in interest from its loan book — leaving a net interest loss of BDT 59.03 billion. The shortfall nearly doubled from the BDT 30.42 billion interest loss the bank recorded in 2024.

A reputational crisis and acute financial distress have forced Janata Bank to gather deposits at elevated rates. The bank’s cost of fund has consequently reached 9.65 percent. Yet its state ownership entitles it to government funds at zero or negligible interest.

Operating expenses are also climbing. Janata Bank spent BDT 20.61 billion on operations last year, up from BDT 18.97 billion in 2024. Salary and allowance costs drove most of the increase, reaching BDT 15.16 billion for the year. The bank disbursed an average of BDT 1.26 billion each month to its employees.

Financial sector specialists believe no bank in the country has ever recovered from a crisis of the magnitude now engulfing Janata Bank. The record supports that assessment.

State-owned BASIC Bank fell victim to looting in the three years after 2009. It disbursed BDT 40 billion in irregular and corrupt loan. The government then injected BDT 35 billion in fresh capital to keep it afloat. The rescue failed. BASIC Bank has since accumulated a net loss approaching BDT 60 billion. Default loans stand at BDT 80 billion, leaving the bank struggling under a non-performing loan ratio of nearly 70 percent.

Padma Bank, formerly Farmers Bank, suffered a similar fate. State-owned banks supplied it with BDT 7.15 billion in capital, alongside hundreds of billions of taka in liquidity and policy support. The promise was that the private lender could be revived. It could not. The bank has never recovered since launching operations in 2013.

Bangladesh Bank also pumped hundreds of billions of taka in liquidity support into several Shariah-based lenders plagued by irregularities, corruption and looting. None have turned around. The previous interim government provided BDT 200 billion as capital for Sammilito Islami Bank. Yet uncertainty now surrounds that bank as well.

Mohammad Muslim Chowdhury, a former finance secretary who served as comptroller and auditor general (CAG) and later chaired the state-owned Sonali Bank, sees no prospect of rescuing banks that have consumed their capital. “Alongside state-owned banks, more than two dozen private banks also face capital shortfalls,” he told Bonik Barta. “Some of these can’t be kept afloat by any means. Given the condition Janata Bank finds itself in, any effort to revive it would be a mistake.”

“No bank in Bangladesh has ever turned around after capital infusions,” the former CAG noted. “The government poured BDT 35 billion of taxpayers’ money into BASIC Bank, yet it couldn’t heal a wound of BDT 30 to 40 billion in irregularities and corruption. Padma Bank received capital from state-owned lenders with zero result. I believe liquidation is the only path for banks facing a situation like Janata’s. Injecting capital in the name of saving them is a waste of public funds.”

Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue and a current board member of Bangladesh Bank, offered a similar assessment. “State-owned banks have been recapitalised from the government treasury time and again. It has produced no result,” she told Bonik Barta. “In the current circumstances, it’s impossible to provide capital from taxpayers’ money. Weak banks must now try to recover under their own steam. Otherwise, the government must take hard decisions.”

Dr Khatun added that Janata Bank must focus on recovering its defaulted loans, boosting employee efficiency and accelerating operations through effective governance and automation.