Written by The Banking Post
Non-performing loans (NPLs) in Bangladesh’s agriculture sector have soared, with nearly 34 per cent of outstanding farm credit now in default, according to the latest data from Bangladesh Bank. The surge has raised renewed concerns about financial stress in a sector that anchors the country’s food security and rural livelihoods.
As of October 2025, total loans in agriculture, fisheries and forestry stood at Tk 598.81 billion. Of this, Tk 203.03 billion — 33.91 per cent — were classified as non-performing.
Economists say the spike reflects a mix of worsening economic conditions, rising input costs, repeated climate shocks and chronic failures to ensure fair prices for farm produce. All of these have eroded farmers’ repayment capacity.
The central bank’s stricter loan-classification rules have amplified the rise. Loans are now labelled non-performing after three months of missed payments, instead of 12. More frequent BB inspections have also unearthed previously concealed defaults across agriculture, manufacturing, construction and trade.
Bankers add that many borrowers failed to renew revolving loans on time or fell behind on rescheduled instalments, pushing more accounts into default.
For FY26, banks set a farm-loan disbursement target of Tk 390 billion. But between July and October, they disbursed only Tk 119.27 billion — falling short of the proportional target by about Tk 30.58 billion. Recovery rates continue to slip as well.
In FY25, banks disbursed Tk 373.26 billion in agriculture and rural loans, achieving 98.23 per cent of the annual goal. But state-owned banks remain the most exposed: their outstanding agriculture loans total Tk 399.69 billion, of which Tk 187.57 billion — 46.93 per cent — are now classified as non-performing.
A senior private bank official said production costs have climbed sharply this year — fertiliser, seed, pesticide and irrigation by 10–20 per cent — while fish farmers face steeper feed and maintenance expenses. Forestry-related labour and transport costs have also gone up.
Economist Masrur Reaz said the new NPL rules have improved transparency but also laid bare long-standing structural weaknesses.
“The stricter definition is not the problem — it is simply revealing the true health of the portfolio,” he said.
“But the bigger concern is that agriculture finance has not seen the institutional reforms applied in other sectors. Without modernising extension services, improving input supply chains, expanding digital credit scoring and strengthening loan monitoring, NPLs will remain persistently high,” he added.
