One-third of local private banks keep NPLs below 10%

• Seventeen banks maintain single-digit NPL ratios
• Industry average stands at 36 percent
• Strong governance and cautious lending ensured resilience
• Citizens Bank lowest, Jamuna Bank highest

Seventeen domestic banks have managed to keep their balance sheets relatively clean, with non-performing loans (NPLs) below 10 percent, at a time when most of their market peers are struggling with soaring bad debt, according to central bank data.

The lenders are City Bank, Prime Bank, BRAC Bank, Pubali Bank, Eastern Bank, Mutual Trust Bank, Midland Bank, Meghna Bank, Shahjalal Islami Bank, Dhaka Bank, Jamuna Bank, NCC Bank, Trust Bank, Uttara Bank, Bengal Commercial Bank, Community Bank and Citizens Bank.

Currently, there are 52 local banks in the country, while the industry average NPL stands at 36 percent.

Industry insiders said these 17 banks limited bad loans through cautious lending, stronger credit risk assessment, diversified loan portfolios, close monitoring of borrowers, and timely recovery efforts, even as widespread corruption weakened asset quality across much of the sector.

They said improved corporate governance and a focus on quality growth rather than aggressive expansion also played a key role.

Some newer banks, with smaller loan portfolios, benefited from lower default exposure compared with older lenders burdened by legacy loans.

Among the seventeen banks, newly licensed Citizens Bank posted the lowest NPL ratio at 1.74 percent, while Jamuna Bank recorded the highest within the group at 9.06 percent as of September this year.

According to the central bank data, NPLs at City Bank, Prime Bank, Eastern Bank, BRAC Bank and Bengal Commercial Bank are below five percent.

At the end of September this year, City Bank reported its non-performing loans at Tk 2,439 crore, equivalent to 4.76 percent of its total disbursement.

Mashrur Arefin, managing director of City Bank, said that the bank's NPL ratio stood at 3.6 percent in 2024, well below the industry average. "In 2025, it is expected to fall further to below 3 percent."

"This improvement reflects the bank's strong and disciplined governance framework, where credit decisions are made professionally with no interference from the board, and where business and credit risk are two completely separate functions," he told The Daily Star.

According to Arefin, a well-diversified loan portfolio reduces concentration risk, while effective credit control systems allow for close monitoring of accounts.

Proactive recovery initiatives, timely provisioning, and strong capital and liquidity management have further strengthened asset quality, he said, adding that these factors enable City Bank to manage NPLs sustainably despite a challenging banking environment.

Ali Reza Iftekhar, managing director and CEO of Eastern Bank, said that the commercial lender's NPLs have remained around 3 percent for the last 33 years.

"We carefully screen and assess clients at the onboarding stage. In addition, we keep them under continuous and strong monitoring, which is why our NPL ratio remains low."

The CEO said the bank has a large recovery team organised on a bucket-wise basis. One team handles loans delayed by one to 30 days, while another takes over when delays exceed that period.

"Each team works independently, and there is a separate legal team as well. This is how we conduct our banking operations," he added.

Until September this year, Prime Bank's total disbursed loans stood at Tk 32,784 crore, of which Tk 1,316 crore became defaulted, representing only 4.01 percent.

"All our credit proposals are vetted for financial viability and sustainability at the time of approval," said Hassan O. Rashid, chief executive officer of Prime Bank.

He added that after disbursement, the bank monitors the loan and business performance of borrowers closely. "We avoid sectors where NPLs are high and put a lot of effort into recovery."

At the end of September this year, defaulted loans at BRAC Bank stood at Tk 2,401 crore, or 3.58 percent of its total disbursed loans.

The bank's board consists of eight directors, seven of whom are independent. It also includes economists, bankers, and other experienced professionals, establishing BRAC Bank as a strong institution.

"BRAC Bank's owners do not interfere in management, while the board formulates policy and management handles operations," said Tareq Refat Ullah Khan, managing director and CEO of the bank.

He told The Daily Star that BRAC Bank places strong emphasis on its recovery department, which is weak in many other banks.

"We recruit experienced professionals in this area because recovery is one of our core priorities. In addition, we give opportunities to problematic borrowers by allowing them to continue their businesses, which helps us in loan recovery."

At the end of September, NPLs at Mutual Trust Bank stood at Tk 3,553 crore, or 6.83 percent of total disbursed loans.

Syed Mahbubur Rahman, managing director and CEO, said that the bank follows proper procedures when disbursing loans.

"We did not act on anyone's recommendation or instruction," he told The Daily Star, adding that even the board did not influence management activities. "That is why we have been able to keep our NPLs low."

He said the bank declined many seemingly viable projects because the assessment suggested problems with the sponsors' repayment behaviour and planning.

"We did not sanction loans under any influence. Loans are approved based on documentation reviewed by each department separately. The board and management of the bank do not tolerate any conflict of interest," added Rahman.