Progga Das

The banking system is often referred to as the heart of the economy. If this heart fails to pump blood, the body of the state becomes paralyzed. Unfortunately, in Bangladesh, this vital organ has started to decay. The books may show that loans have been disbursed, but in reality, the money is unlikely to return. And the white-collar corporate faces of the defaulters seem to grow stronger under the soft protection of the state. Words like "trust," "security," and "service" echo on the walls of banks, but in practice, they have become a cruel irony. Unregulated loan disbursement, political influence, weak regulatory structures, and audacious corruption are collectively driving the banking sector toward collapse. This is not merely an economic disruption; it is a silent bankruptcy of state morality. According to the Bangladesh Bank in the first quarter of 2025, non-performing loans (NPLs) in the country’s banking sector have reached nearly Tk 1.78 trillion. That is, a massive portion of the money loaned from the public deposit reserves is unlikely to return. This is not just a number, it signifies the volume of bleeding in our economy. The concept of taking loans from banks has become distorted under the grip of loan default. For one class, loans serve as a gateway to capital; for another, it signals impending bankruptcy. The list of corporate defaulters includes renowned business groups, influential industrialists, and political businessmen. They not only failed to invest the billions they borrowed but laundered it through various channels or registered their relatives' names under bogus projects. This is a blatant abuse of power. At the root of the banking sector's crisis lies a lack of good governance. Primarily, a lack of transparency and accountability in the loan distribution process has made the problem more complex. Banks often succumb to political influence, allowing unqualified individuals or institutions to obtain massive loans. Most of these loans become non-performing because they were approved without adequate collateral or viable business plans. A report by the Bangladesh Institute of Bank Management (BIBM) revealed that in the past decade, around 30% of loans in Bangladesh were disbursed without proper risk analysis. This negligence has not only destroyed bank assets but has also hindered the overall dynamism of the economy. On the other hand, banks' inability to recover defaulted loans has intensified the crisis. Legal proceedings in Bangladesh are so slow that resolving a single NPL case can take five to seven years. During this time, defaulters often transfer their assets, leaving banks with no recourse. This has created a toxic culture where defaulting on loans is increasingly seen as a socially acceptable behavior for the powerful. Most regrettably, Bangladesh Bank, as the central bank, should have acted firmly to curb this anarchy. However, in reality, the institution has remained largely silent on loan default. One report noted that in the past five years, Bangladesh Bank has taken only 12 significant punitive actions against defaulters, although more than 50 complaints of irregularities are raised annually. This exposes the regulatory weakness of Bangladesh Bank. Moreover, the central bank's loan rescheduling policy has worsened the crisis. This policy allows banks to show defaulted loans as regular, masking their financial weaknesses. As a result, instead of addressing the root causes, the problem remains dormant and unresolved. The shadows of this crisis have spread across the economy. Due to capital erosion, banks’ lending capacity is shrinking, leading to reduced investment in industry and commerce. The deeper wound is the loss of public trust. A survey shows that 40% of depositors in the country are concerned about the safety of their money in banks. This crisis of confidence is further straining liquidity in the banking system, pushing the entire financial structure toward instability. Over the past five years, banks have lost about Tk 150 billion in potential profits due to NPLs. If this money had been reinvested in the economy, thousands of new jobs could have been created. This loss is not just the banks’; it’s a loss for the entire nation. However, overcoming this crisis is possible if we take bold and coordinated action now. Transparency and accountability must be restored in the banking sector. Loan disbursement must follow international risk analysis standards, and political interference must end. Special tribunals can be established to streamline the legal process of loan recovery. The names of loan defaulters should be made public to pressure them socially into repayment. Strengthening the regulatory authority of Bangladesh Bank is also essential. At the same time, regaining public trust is crucial. Banks must improve service quality, introduce transparent accounting systems for customers, and ensure deposit security. If implemented correctly, these measures can help the banking sector regain its lost glory. Today, Bangladesh's banking sector stands at a crossroads of existential crisis. Unregulated lending and the culture of default are leading this sector down a path from which return will be difficult. This is not just the failure of a system, it is a silent surrender of a state. Thus, the time to act is now. Through proper reforms, strong political will, and awareness at all levels of society, this crisis can be overcome. A restructured banking sector will not only revive the economy but can also become the center of Bangladesh's journey toward development. Because behind every prosperous nation lies a strong and trustworthy banking foundation.This could be the cornerstone of our future economic freedom.

The writer is a student, Department of Economics,Eden Mohila College