Half of Rupali Bank’s Bad Loans Locked With Just 20 Borrowers

Nearly half of Rupali Bank’s Tk19,805 crore in defaulted loans is stuck with just 20 borrowers, and in the first half of this year the state-owned lender recovered a paltry Tk4.03 crore from them. That’s the picture emerging from central bank data and reporting by The Business Standard on the worsening rupali bank non performing loans problem.

The bank has Tk9,859 crore in outstanding loans to these two dozen borrowers, an amount that effectively freezes a big slice of its balance sheet. When a loan book this concentrated turns sour, the bank can’t easily lend to new businesses and its capital takes a hit, which is precisely the bind Rupali finds itself in.

Twenty borrowers, a bank’s worth of trouble

The concentration is the striking part. A handful of defaulters holding half the bad debt is not a random distribution of failures. It points to large corporate exposures that went wrong, likely involving loans that were restructured or extended too generously in the first place.

Even a modest recovery from these defaulters would transform Rupali’s finances. Instead, the bank is getting back mere crore in a year, a fraction of what it’s owed.

Bangladesh’s wider bad loan drag

Rupali is far from alone. The Daily Star reports that 85 percent of the country’s defaulted loans are concentrated in just 15 of its 61 banks, which shows how loan irregularities, fraud and financial scams have piled up across the system. Janata Bank, another state lender, carries the bulk of the state banks’ bad loans, and the sector as a whole is struggling to clear this backlog.

State banks are the ones that keep getting dragged into the mess. The appointments of chiefs for six state banks are being eased, per Daily Bonik Barta, but fresh leadership won’t erase the accumulated debt overnight.

Why this hits the ordinary account holder

Here’s what the numbers mean for someone with a savings account at a state bank. A bank that can’t recover loans has less money to lend, and it has to set aside capital to cover potential losses. That strains its ability to fund new projects, and in the worst cases it raises the cost of credit for everyone else.

What’s surprising is that the recovery so far is so tiny. A bank that is owed thousands of crores should be chasing those borrowers hard, repossessing collateral, or forcing asset sales. The fact that only a few crore came back suggests either the collateral is weak or the process is moving at a crawl.

What to watch next

The central bank’s data as of March showed the scale of the problem, and the first-half recovery numbers confirm the trend hasn’t turned. The next set of quarterly figures will show whether the new policy of easing appointments for state bank chiefs helps Rupali and its peers take tougher action on defaulters.

The open question is whether these 20 borrowers will ever be forced to pay, or whether the loans will simply be written off. On the answer to that hinges whether rupali bank non performing loans stays a headline or becomes a footnote.

The recovery machinery is broken

Why is recovery so slow? Under Bangladesh’s rules, state banks often have to go through a lengthy legal process before they can seize collateral, and defaulters routinely get injunctions from courts. A 2023 study by the Bangladesh Institute of Development Studies found that the average time to resolve a loan dispute in the country was nearly eight years. By then, collateral has decayed or been sold off, leaving the bank with little to claim. Rupali’s own annual report shows that it had filed 3,400 loan default suits against borrowers, but only a small fraction had reached judgment.

The problem is compounded by a culture of forbearance. Banks restructure loans repeatedly to avoid reporting them as non-performing, and this cycle keeps the real quality of assets hidden. One banker familiar with the matter told TBS that many of the 20 borrowers had been given multiple extensions, with the result that the original loans had turned into long-term, low-interest liabilities that the bank could not reprice.

What the central bank can do

The Bangladesh Bank has the power to force banks to write off unrecoverable loans and to impose penalties on directors who approve reckless lending. In its last monetary policy statement, it said it would introduce a stress test for state banks’ balance sheets. That test, if applied rigorously, could require Rupali to raise more capital or sell off some of its non-core assets. The danger is that political interference blocks such steps: state bank boards are still appointed by the government, and they are rarely willing to antagonize powerful borrowers.

The coming quarters will show whether the new leadership at the six state banks will act any differently. If they don’t, the burden will fall on the public — either through higher interest rates, lower deposit rates, or, ultimately, a taxpayer-funded bailout. For now, the numbers suggest that the ordinary account holder is already paying the price in the form of a weaker credit market.

Frequently Asked Questions

Why are so few loans being recovered from Rupali Bank's top defaulters?

The bank recovered only Tk4.03 crore from its 20 largest defaulters in the first half of the year. This suggests either weak collateral that can't be sold for much, or a slow legal process for forcing repayment. Large corporate defaulters often have complex loan structures that take years to unwind.

How does Rupali Bank's bad loan problem affect me as a customer?

When a bank can't recover loans, it has less money to lend to new businesses and must set aside capital to cover losses. That can mean tighter credit, higher interest rates on new loans, and a weaker bank overall. It doesn't directly hit your deposits, but it does make the bank less stable.

Is Rupali Bank alone in facing this problem?

No. The Daily Star reports that 85% of all defaulted loans in Bangladesh are concentrated in just 15 of the country's 61 banks. Janata Bank, another state lender, carries the bulk of the state banks' bad loans. This is a sector-wide issue, not just a Rupali problem.

What happens next for Rupali Bank?

The central bank's data as of March set the baseline, and first-half recovery numbers show the trend hasn't improved. The government is easing rules to appoint chiefs for six state banks, which may bring in fresh leadership. The next quarterly data will show whether any of this helps Rupali recover its bad debt.