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The International Monetary Fund (IMF) has expressed concern over Bangladesh Bank’s loan rescheduling policy and its reluctance to disclose information on major loan defaulters, arguing that the measures may be masking the true scale of non-performing loans (NPLs) in the country’s banking sector.
According to sources, the IMF has criticised the practice of allowing large defaulted loans to be rescheduled with minimal down payments, saying it artificially lowers the reported NPL ratio on banks’ balance sheets while many of those loans remain unpaid for years.
Bangladesh Bank has reportedly prepared profiles of major loan defaulters but has not made them public. The IMF has also complained that the central bank has been slow to provide the requested information despite repeated requests. The issue was raised during meetings between the visiting IMF mission and Bangladesh Bank officials in Dhaka.
Sources said IMF representatives met Bangladesh Bank Governor Md Mostakur Rahman on Tuesday to review the progress of the ongoing IMF-supported programme, discuss recommendations from previous missions, and seek key banking sector data.
During the meeting, IMF officials questioned whether Bangladesh Bank was extending policy concessions to major loan defaulters. They noted that although they had requested bank-wise profiles of top defaulters during an earlier mission, the information was not provided. The explanation that such data were unavailable at the central bank also failed to satisfy the IMF.
Officials familiar with the discussions said Bangladesh had repeatedly pledged to reduce the NPL ratio to below 10 percent. However, the situation has worsened, with the banking sector’s default loan ratio rising to 32.26 percent at the end of March. The ratio is nearly 46 percent in state-owned banks, while several banks have reported default loan ratios exceeding 90 percent.
The IMF believes that a significant share of loans obtained through irregularities has not been used for productive purposes and wants to analyse the profiles of major defaulters to assess the actual condition of the banking sector.
The delegation also expressed concern that some banks were understating their default loans under the influence of powerful groups, undermining loan recovery efforts and worsening liquidity shortages. As a result, Bangladesh Bank has had to provide liquidity support, increasing risks to financial stability and posing longer-term threats to the broader economy.
The IMF also raised questions about Bangladesh Bank’s intervention in the foreign exchange market, warning that certain intervention mechanisms could create opportunities for money laundering. The discussions also covered the government’s ongoing efforts to recover laundered funds, with the IMF calling for a more transparent and market-based exchange rate framework.
The IMF delegation further sought clarification on the bank merger process, including whether public funds would be used to subsidise loss-making banks.
A Bangladesh Bank official, speaking on condition of anonymity, said the IMF also sought clarification over questions raised domestically about the country’s $4.7 billion IMF loan programme, including the status of pending loan disbursements and the central bank’s position.
Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan said the meeting was a courtesy call in which both sides discussed future engagement, information-sharing arrangements, and the next phase of policy dialogue. He added that the relevant departments would hold detailed discussions with the IMF on technical and policy issues in due course.