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The financial health of the country’s six state-owned commercial banks (SoCBs) has come under sharp scrutiny after a government review revealed an alarming rise in default loans, amounting to Tk1.49 lakh crore—roughly 44 percent of their total disbursed credit.

Officials of the Financial Institutions Division (FID) presented the figures at a high-level meeting chaired by the finance adviser this week. The presentation covered key indicators including capital adequacy, profit earnings, non-performing loans (NPLs), recovery efforts, pending litigations, audit objections, and provision shortfalls.

Top defaulters dominate

The report revealed a severe concentration of default risk, with nearly Tk85,000 crore—or 57 percent of the total defaults—linked to just 20 top defaulters.

“The main problem of the banks remains default loans,” an official told reporters after the meeting. The adviser directed bank management to intensify recovery drives, especially targeting the largest borrowers, while ensuring strict governance in lending practices.

He also warned that boards of directors must refrain from interfering in day-to-day operations of the banks, urging professional autonomy in management.

Legal backlog and tribunal proposal

The meeting highlighted that nearly 48,000 default-related cases are currently pending in courts. To tackle this backlog, the adviser instructed banks to strengthen their law departments, while the FID would coordinate with the attorney general’s office to expedite proceedings.

Participants also discussed the possibility of forming a dedicated loan recovery tribunal, similar to mechanisms in India, Pakistan, Sri Lanka, and Malaysia. Although the idea gained support, no final decision was reached.

Reforms and audit resolution

The adviser called on the Bangladesh Bank and FID to modernise the insolvency framework in line with the Bank Resolution Act, making it easier to restructure or wind down troubled borrowers. He also asked bank top management to be “sincere” in addressing unresolved audit objections, which continue to undermine transparency and credibility.

Deposits remain stable

Despite their default burdens, the six SoCBs recorded an increase in deposits between January and June this year, officials reported. Customers have continued to park funds in these banks rather than withdraw, reflecting enduring public confidence.

Encouraged by this stability, the adviser instructed banks to accelerate loan disbursement from deposits to stimulate industrialisation, create jobs, and support economic recovery.