In the early 1980s, the government transferred state-owned Pubali and Uttara banks to the private sector. Both were in fragile shape with their non-performing loans elevated and staff restive. Over the decades that followed, the two banks turned themselves around. Today they sit among the top private-sector lenders, buoyed by strong capital buffers, minimal bad debt and record earnings.

By contrast, every bank that remained under state ownership now finds itself in a precarious position.

Pubali Bank’s audited accounts show its non-performing loan ratio stood at only 2.20 percent at the end of 2025. Its capital-to-risk-weighted-assets ratio (CRAR) reached nearly 16 percent. The bank also posted a record net profit of BDT 10.90 billion and declared the maximum 30 percent dividend for shareholders.

Uttara Bank delivered similar discipline. Its NPL ratio at year-end was 4.84 percent, comfortably below 5 percent, while its CRAR topped 17 percent. Net profit hit BDT 5.98 billion, and the bank also rewarded investors with a 30 percent dividend.

The two privatised banks have sustained their expansion for more than a dozen years, steadily adding capital, deposits, loans and profits. Shareholders have drawn steady dividends as well. The state-owned lenders, however, have weakened relentlessly over the same period.

Bangladesh’s six state-owned commercial banks are Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank (BDBL). There are also two specialised state banks — Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB). Of the eight, only Sonali is in relatively better health. The financial state of the remaining seven is fragile.

Bangladesh Bank data show that at end-December last year, non-performing loans across the eight state-owned banks exceeded BDT 1.64 trillion — roughly 45 percent of their combined loan books. That bad-debt overhang has crushed their capital adequacy. The central bank requires every scheduled bank to hold a CRAR of at least 12.5 percent, inclusive of the capital conservation buffer. Not a single state bank meets that floor. Sonali managed 10.11 percent. All the rest report capital shortfalls. Janata Bank alone carries a deficit — including provisioning gaps — of more than BDT 640 billion. The shortfall at Krishi Bank has swollen to BDT 310 billion.

None of these banks returns a dividend to the government. Instead, the state keeps plugging capital into them with taxpayer money.

Pubali Bank began its journey in 1959 as Eastern Mercantile Bank Limited in what was then East Pakistan. Several Bengali entrepreneurs drove the creation of the privately owned lender. After Bangladesh became independent, the government nationalised the bank in 1972 and renamed it Pubali Bank. By 1983, ailing like other state-owned banks, it was handed back to private hands. Today the bank runs 518 branches, 280 sub-branches and 30 Islamic banking windows across the country.

Helal Ahmed Chowdhury, now chairman of BASIC Bank, once served as Pubali Bank’s managing director. He told Bonik Barta that the lender was in a dire state when it was privatised. “In 1983, when it was returned to the private sector, the bank was sick. Non-performing loans were very high. But we pulled it back,” he said. “We had the full support of the board. The directors never interfered in day-to-day operations. That’s how the bank succeeded. By 2010, when I was the managing director, I had already brought the NPL ratio down to 2 percent.”

State-owned banks, he argued, never enjoyed that freedom. “Political interference drove them to lend to oligarchs. Their boards and management lacked good governance. That’s why nearly half the loans of state banks have gone bad,” Chowdhury said. “Since I took over at BASIC Bank, I’ve been trying to turn it around for the past year and a half.”

Pubali Bank’s financial report shows total assets and liabilities of BDT 1.18 trillion at year-end. Against deposits of BDT 895.19 billion, its loan book stood at BDT 711.40 billion. Despite being one of the country’s oldest lenders, its NPL ratio remained just 2.20 percent. The bank held provisions and capital well above regulatory minimums. Net profit reached BDT 10.90 billion in 2025, up from BDT 7.80 billion the year before.

Asked how the bank delivered record profit while keeping bad loans in check, Pubali Bank Managing Director and Chief Executive Officer Mohammad Ali told Bonik Barta: “The key to success is corporate governance at every level.”

If governance is practised in lending, investment, recruitment and promotion, no bank should go bad, he said. “Pubali Bank practises it effectively. That’s why we’ve posted consistent success over the past few years.”

Mohammad Ali said he always states with pride that the bank has no loans to any “briefcase company”. That discipline, he added, has driven strong net profit growth and kept non-performing loans under control. “Pubali Bank will do even better in the future,” he argued.

Uttara Bank has also sustained steady growth for two decades since the government returned it to the private sector in 1983. It began operations on January 28, 1965 as Eastern Banking Corporation. After independence, the state nationalised it and renamed it Uttara Bank, before returning it to the private sector. The bank now serves customers through 250 branches and 50 sub-branches.

According to its audited financial report, total assets and liabilities reached BDT 321.42 billion at the end of last year. Customer deposits stood at BDT 268.49 billion, while loans totalled BDT 220.17 billion. In December, when the banking sector’s average default loan ratio topped 30 percent, Uttara Bank’s rate was just 4.84 percent.

Managing Director Md Abul Hashem said unwavering customer trust and confidence had brought the bank to its current position. It has grown consistently since 2001, he told Bonik Barta. “Despite the crisis enveloping the banking sector, we’ve held our customers’ trust and confidence. That has kept bad loans in check, delivered steady profit growth, and taken our CRAR above 17 percent without issuing a single bond.”

Despite its privatisation in 1983, many still regard Uttara Bank as state-owned, its managing director added. “We’ve maintained effective governance. We never lend without collateral, no matter the pressure. Uttara Bank has been giving investors more than 20 percent dividend for over a dozen years.”

Audited reports from the state-owned banks paint a far bleaker picture. Janata Bank’s non-performing loans reached BDT 728.04 billion at year-end, nearly 70 percent of its loan book. It posted a net loss of BDT 39.17 billion in 2025 alone. Agrani Bank held BDT 310.14 billion in bad loans (39 percent), Rupali Bank BDT 200.15 billion (39 percent), Sonali Bank BDT 166.15 billion (16 percent) and BASIC Bank BDT 83.16 billion (65 percent). The two agricultural lenders, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank, together carried BDT 185.46 billion in non-performing assets, roughly 40 percent of their disbursed credit.

Why have the two denationalised banks succeeded while the state-owned lenders have failed? Former Sonali Bank Chairman Mohammad Muslim Chowdhury blamed political interference.

“State-owned banks have been damaged by political interference. Chairmen and directors are appointed on political grounds, so boards and management have buckled under political pressure. They lent without observing norms, and those loans aren’t coming back. Most state banks are in very poor shape. It’s extremely difficult to drag them forward with finances this fragile,” he told Bonik Barta.

Chowdhury, a former finance secretary who also served as Comptroller and Auditor General, said no bank in Bangladesh has ever turned around after a capital injection.

“The government injected BDT 35 billion of taxpayers’ money to save BASIC Bank, but it couldn’t overcome losses of BDT 30 to 40 billion caused by irregularities and corruption. Capital was also provided from state banks to rescue Padma Bank, but the result was zero. I believe privatisation, liquidation or merger is the answer for banks in a fragile state. Pumping in capital to save them is a waste of public money. Given Bangladesh’s economic conditions and government requirements, a single bank is sufficient in this sector.”