Bangladesh Bank has offered a series of concessions to reduce defaulted loans, including rescheduling with nominal down payments and one-time settlements with interest waivers. But the concessions have failed to draw in large defaulters. The number of large and medium-sized defaulters is steadily rising, while the number of small borrowers in default is falling.
The number of defaulters in the banking sector fell from 4,486,286 at the end of June 2025 to 3,946,914 in June 2026, according to central bank data. None of those who dropped off the list was large borrowers. The number of borrowers with BDT 10 million or more in defaulted loans instead rose by 530 over the period, whereas defaulters with loans of up to BDT 10 million fell by 539,902.
The figures, published on Sunday in Bangladesh Bank’s Banking Sector Update report, set out a striking disparity across loan sizes. At the end of June, 33.2 percent of all loans disbursed by the banking sector were in default. The default rate for small loans was less than half that average, with loans of up to BDT 10 million carrying a default rate of 15 percent.
For larger amounts, default rates rise sharply. Loans of BDT 10 million to BDT 100 million stand at 26.9 percent in default, rising to 44.6 percent for loans between BDT 100 million and BDT 200 million. The rate sits at 37.9 percent for loans of BDT 200 million to BDT 300 million and 38.8 percent for BDT 300 million to BDT 400 million.
Borrowers with loans of BDT 400 million to BDT 500 million have the highest default rate — 46.4 percent. Those with more than BDT 500 million are close behind: Bangladesh Bank reports that banks cannot recover 43.4 percent of loans taken by this group, which has shown little response to recovery appeals.
More than 70 percent of bank lending is concentrated in large and medium-sized industries, according to the central bank’s report, and nearly 40 percent of the loans disbursed to those sectors are now in default.
Defaulted loans across the banking sector as a whole exceeded BDT 6.06 trillion at the end of June 2026, with large and medium businesses accounting for nearly 80 percent of the total. Central bank data show that banks had BDT 18.08 trillion in total outstanding loans, 60 percent of which went to large industries, where 39.6 percent of disbursed funds have turned bad.
Medium industry received 6.7 percent of all lending, with 38.7 percent in default. Small and micro industry, key to the rural economy and employment, received just 13.5 percent of bank lending, while cottage industry accounted for only 1.9 percent.
Bank executives and others involved in the sector say small and micro entrepreneurs repay their bank loans, but large entrepreneurs have created a culture of borrowing without repayment. They allege that money was siphoned out of more than half the country’s banks during the 15 years of the ousted Awami League government through loans, with the collusion of bank boards and management. After the July 2024 uprising, many businessmen identified as bank looters fled the country, while others were arrested and remain in prison.
These factors have contributed to a continuing decline in recovery rates for large loans, according to stakeholders. By contrast, small entrepreneurs continue to repay bank loans despite economic stagnation, high inflation and higher interest rates.
Arief Hossain Khan, the central bank’s spokesman and an executive director, told Bonik Barta that genuine entrepreneurs always repay their loans, with CMSME borrowers leading the way.
“For several years, we have been pressing for more lending to micro and small entrepreneurs. It didn’t take much effect for a long time, but lending to the sector has risen since last year,” he said. “We hope that in the coming years the CMSME sector will be able to play a bigger role in the economy.”
Among the country’s banks, BRAC Bank PLC lends the most to CMSME borrowers. The bank’s default rate is currently below 2 percent overall and about 1 percent on small loans, according to managing director and chief executive Tareq Refat Ullah Khan.
“Half of BRAC Bank’s loan portfolio is in the CMSME sector, and nearly half of that has gone to micro-businesses,” he told Bonik Barta. “Our recovery rate from those micro-entrepreneurs is the best of any group. If the right person is chosen for a small loan, it shouldn’t go into default. What we have seen is that these entrepreneurs are eager to repay.”
Getting loans to micro and small entrepreneurs requires a nationwide physical network and close supervision to ensure funds are used properly, Khan added. BRAC Bank employs about 10,200 permanent staff alongside more than 3,500 other people who work with the bank, most of them assigned to SMEs.
While this keeps the bank’s income-to-expense ratio relatively high, Khan attributed it to the foundation of BRAC Bank’s success. He added that many had initially been wary of investing in the sector, but that “greater expertise over time would help bring down costs” and the model would then become profitable.