A sharp escalation in loan defaults among small borrowers—specifically Cottage, Micro, Small, and Medium Enterprises (CMSMEs), agricultural workers, home loan recipients, and retail consumers—presents a growing structural risk to Bangladesh’s financial sector. Data released by Bangladesh Bank reveals that the total count of defaulted accounts holding loans under Tk 1 crore grew by more than 2.38 million over a 12-month period, climbing from 2.16 million in March of the previous year to 4.54 million by the end of March.
While large corporate non-performing loans (NPLs) account for greater absolute monetary losses, central bank officials emphasize that the rapid expansion of defaults across small-value accounts reflects a broader deterioration in retail credit quality. Prolonged macroeconomic pressure, elevated inflation, rising energy costs, and reduced consumer spending have severely eroded the debt-servicing capacity of small-business operators and wage earners alike.
Distribution of Defaults by Loan Bracket
The total outstanding credit across the banking sector stood at Tk 17.83 trillion (Tk 17,83,700 crore) as of March, with an overall system-wide default rate of 32.7%.
| Loan Bracket | Total Default Rate (%) | Number of Defaulted Accounts |
| Below Tk 1 Crore | 15.0% | 4,543,485 |
| Tk 1 Crore – Tk 10 Crore | > 26.5% | 28,501 |
| Tk 10 Crore – Tk 20 Crore | 45.0% | 6,186 |
| Tk 20 Crore – Tk 30 Crore | ~ 36.0% | 1,574 |
| Tk 30 Crore – Tk 40 Crore | ~ 39.0% | 952 |
| Tk 40 Crore – Tk 50 Crore | ~ 45.0% | 669 |
| Above Tk 50 Crore | 42.5% | 2,035 |
| System-wide Average | 32.7% | — |
Sector-Wise Credit Deterioration
The central bank’s report details heavy concentrations of non-performing loans across key economic sectors:
Wholesale & Retail Trade: Accounts for 32% of total bank credit, with approximately 44% currently classified as non-performing.
CMSME Sector: Over 34% of outstanding loans in this category are in default. Within this segment, cottage industries exhibit the highest default rate at nearly 53%, while medium-scale enterprises stand at approximately 38%.
Industrial Sector: Records a 32% default rate across all outstanding industrial credit.
Agriculture, Forestry & Fishing: Represents over 4.25% of total bank loans, with default rates reaching nearly 30% as of March.
Construction: Represents 7% of total bank credit, with non-performing loans standing at roughly 30%.
Consumer & Retail Credit: Makes up 9% of total bank lending, maintaining a default rate of 7%.
Economic Insights and Banking Responses
“The rising default trend among small borrowers is extremely concerning, though hardly surprising. Protracted macroeconomic stress and persistent high inflation have severely eroded the repayment capacity of both salaried employees and small business owners due to rising living expenses and escalating energy costs.”
— Dr. Masrur Reaz, Chairman of Policy Exchange Bangladesh
Commercial banks are actively recalibrating their operational strategies to mitigate escalating credit risks:
Bangladesh Krishi Bank (BKB): Chairman Mohammad Nurul Amin noted that while the bank succeeded in reducing its defaulted borrower count from 2.4 million to 2.0 million over the past year, its overall NPL ratio remains elevated at 38%. BKB recently received Tk 600 crore from the government to cover previously waived agricultural loans and has mobilized dedicated branch-level recovery drives.
Janata Bank: Managing Director Md. Mojibor Rahman confirmed that default pressures have expanded beyond large corporate borrowers to smallholders in agriculture and the SME sector. Branch-level oversight is being intensified to restructure eligible accounts under central bank policy guidelines.
Islami Bank Bangladesh: Acting Managing Director Md. Altaf Hossain indicated that excluding distressed exposures connected to the S. Alam Group, the institution’s NPL ratio ranges between 22% and 23%—below the broader industry average—with ongoing efforts focused on regularizing non-performing accounts.