Years of irregularities, political influence left banks in distress: minister

Finance Minister Amir Khosru Mahmud Chowdhury said the government inherited a deeply troubled financial sector marked by years of irregularities, politically influenced lending, weak oversight, and the concealment of bad loans.

Presenting the national budget in parliament today, the minister said systemic irregularities, opaque lending practices, misuse of loan rescheduling facilities, and deliberate masking of non-performing loans (NPLs) have severely weakened the country's banking system.

"The financial sector we have inherited is a matter of serious national concern," he said.

According to the finance minister, the ratio of NPLs in the banking sector stood at 13.6 percent of total loans in December 2005. By the first quarter of FY2025-26, the NPL ratio jumped to 35.73 percent, equivalent to more than Tk 6.44 lakh crore.

The sharp rise reflects a significant deterioration in the quality of banking assets, he said.

As a consequence, several banks are facing acute liquidity shortages, while public confidence in the banking system has been severely eroded, necessitating emergency interventions and institutional consolidation in some cases.

The minister also highlighted the deterioration in banks' capital strength. The capital adequacy ratio (CAR), which stood at 7.3 percent in 2005, fell to negative 2.64 percent by the end of 2025.

"This erosion in capital buffers points to deep structural weaknesses in the sector and has placed considerable strain on financial stability," he said.

The finance minister said these developments have undermined public trust in the banking system and created difficulties for ordinary depositors in accessing their savings on time.

He stressed the need for comprehensive reforms to restore discipline, transparency, and confidence in the financial sector.