National Bank’s bad loans climb to 75%

Nearly three out of every four taka lent by National Bank has now gone unpaid, according to the central bank, after stay orders that had long protected several large borrowers were lifted in recent months.

As of September this year, defaulted loans at the once-reputed private lender stood at Tk 32,039 crore, accounting for 75.46 percent of its total lending, according to Bangladesh Bank (BB) data.

Meanwhile, senior National Bank officials said the sharp increase did not happen because the bank suddenly made bad lending decisions. Rather, about Tk 9,000 crore in loans that had remained protected under court stay orders were finally classified as defaults once those legal shields were vacated in recent months.

They said many of the loans were extended to influential and politically connected business groups during the previous government. As long as the stay orders were in place, the bank could not treat the loans as non-performing (NPLs), hiding the true scale of the problem.

The officials said that repayments slowed further after the political changeover in August last year, and several large borrowers stopped paying altogether.

Now the exposure of these bad debts has added to the National Bank's long-running financial troubles. The lender has been reporting losses since 2022 and continues to struggle to stabilise its balance sheet.

During the January-September period of this year, the bank posted a net loss of Tk 1,458 crore -- up from Tk 1,360 crore in the same period last year, according to the lender's financial statement.

Due to the high volume of bad debts, the bank also faces a provision shortfall of Tk 24,282 crore, meaning it does not have enough funds set aside to cover potential loan losses.

The bank's basic financial structure is also under pressure. By the end of September this year, its total loans and advances stood at Tk 42,461 crore, while deposits were Tk 34,091 crore.

This means the bank has lent out far more money than it has received from depositors, leaving it vulnerable during periods of stress.

Depositors have responded by pulling back their funds.

In the January-September period of this year, National Bank lost Tk 2,907 crore in deposits, even as new deposits continued to come in. Bank officials said withdrawals remain high, causing liquidity pressure.

To stop the balance sheet bleeding, the Bangladesh Bank provided Tk 8,500 crore to National Bank in liquidity support since the formation of the interim government last year. Despite the fund injection, the commercial lender is still struggling to repay older deposits smoothly.

According to the bank's top management, new depositors are able to withdraw their funds fully, while older depositors are being paid back gradually.

National Bank's decline accelerated during the period when it was controlled by the Sikder family, marked by loan irregularities, weak governance and fraud allegations, including credit card scams.

In May 2024, the Sikder family apparently lost control of the bank as a new board took over. However, after the fall of the Awami League-led government in August 2024, the bank board was restructured again by the central bank.

The central bank formed a new seven-member board comprising three shareholder-directors and four independent directors. BNP Vice-Chairman Abdul Awal Mintoo was one of the three shareholder-directors. Now the businessman is the chairman of the bank board. 

Despite the leadership changes, the scale of bad loans accumulated over the years continues to weigh heavily on the bank. In July, National Bank appointed Adil Chowdhury, an experienced banker, as the managing director.

Chowdhury acknowledged that the lifting of court stay orders pushed up headline NPL figures. He, however, said the bank has begun rescheduling large loans and recovering cash.

"We have already rescheduled Tk 3,500 crore in non-performing loans, and another Tk 10,000 crore is in the pipeline," he told The Daily Star. "Since I joined, we have recovered more than Tk 700 crore in cash."

He said the bank targets bringing down its NPL ratio to 30 percent to 40 percent by the end of this year, though industry insiders say such a turnaround will take time, given the depth of the problem.

For now, the bank has limited its lending activity and is focusing on trade finance, remittances, cards, and small and medium-sized loans.

Data show that large borrowers of National Bank include Maisha Group, Beximco LPG, FMC Group, Bashundhara Group (Bashundhara Infrastructure, Development, Paper & Multi Paper Industry Ltd; Bloom Success International Ltd; Bashundhara Oil & Gas Company Ltd; Radium Composite Textile Mills Ltd; Manha Precast Technology Ltd), Karnaphuli Group (Total Karnaphuli and Desh TV), Opex Group, Broadway & Prokritee, Nassa Group, Saad Musa Group and Western Marine Shipyard Ltd.

Bank officials said the lender has set a recovery target of around Tk 14,000 crore by December.

According to them, loans to several large clients are being rescheduled, Bashundhara has repaid a portion of its dues, and plans are underway to sell a power plant owned by Maisha Group to recover funds.