Rakib Hasan Alif

Four years ago, Bangladesh Bank allowed eleven large business groups to reschedule loans that had already been restructured once, on the condition that they continued making payment on time. This year several of those same groups returned to reschedule the very same loans again. Their legal status remained unchanged throughout. Under central bank rules, they were never classified as defaulters. This is not a loophole buried in the fine print. It is written into the Master Circular on Loan Classification and Provisioning which Bangladesh Bank has issued and revised since 2012. the circular states that a rescheduled loan cannot be treated as defaulted loan. It also says the borrower cannot be treated as defaulter while rescheduling remains available under the rules. A loan can be rescheduled once. It can be rescheduled again. The label "defaulter" never has to apply. 

The mechanics look strict on paper. A first rescheduling requires a down payment of five to fifteen percent of the overdue installments on twenty percent of the total outstanding balance, whichever is lower. A third rescheduling raises the requirement to fifty percent of the overdue installments or thirty percent of the total outstanding balance. In theory, each round becomes more expensive, making repeated rescheduling less attractive. 

In practice, large borrowers do not follow that path. Bangladesh Bank created a separate restructuring framework for large business groups through BRPD Circular No. 04, issued on 29 January 2015. It allows a company or business group to apply for restructuring regardless of how its loan is classified. The application must include a business plan and a viability analysis. The bank's board can then approve the proposal directly. Since late 2025, the framework has become even more flexible. 

A BRPD circular issued on 24 November 2025 made the terms even more generous. It allowed any loan classified as bad by 30 November 2025 to be rescheduled for up to ten years with two year grace period.  Borrowers had to pay an upfront amount equal to just two percent of the outstanding balance. Another BRPD circular, issued on 22 February 2026, cut even that requirement in half. The remaining amount could be paid within six months. The concessions were so generous that the High Court later questioned the legality of circular that granted defaulters up to ten years to repay. 

The scale of the problem is now reflected in the government's own figure. Speaking in Parliament in April

2026, Finance minister Amir Khasru Mahmud Chowdhury said defaulted loans had reached Tk 5,44,831.88 crore as of 31 December 2025. He identified the country's twenty largest defaulters. Ten of them belonged to the S Alam Group alone, including S Alam Super Edible Oil, S Alam Vegetable Oil and S Alam Refined Sugar Industries. The remaining names were dominated by Beximco Group, Deshbandhu Group, Keya Cosmetics and Pacific Bangladesh Telecom, a company linked to former foreign minister M Morshed Khan. 

Defaulted loans did not remain stable while these policies were in place. They rose from Tk 3.45 lakh crore in December 2024 to Tk6.44 lakh crore by September 2025, after banks were required to disclose bad loans that had remained hidden under the previous government. By December 2025, the figure had fallen to about Tk 5.44 lakh crore. According to the Business Standard, Bankers said the decline reflected policy driven loan rescheduling rather than actual repayment. 

Bangladesh Bank formed a five-member committee in January 2025 to review rescheduling requests for loans of Tk 50 crore or more. Around 1250 companies applied, including some of the country's largest business groups. By August the committee had approved 250 applications and granted repayment periods of five to fifteen years. Under the rules applications were supposed to pass through the banks before reaching the committee. According to the Business Standard, many companies applied directly instead. The committee then informed the banks which borrowers qualified. In practice, the approval process worked in reverse. 

The cost of this system extends far beyond a bank's balance sheet. When a large share of a bank's lending capacity remains tied up with a small group of repeat reschedulers, less credit is available for other borrowers on normal terms. Banks also face greater risk, which pushes up the overall cost of lending. At the same time, they must set aside larger provisions against potential losses. That money could otherwise support new loans for businesses and households. The burden does not end with the banks. When a state owned bank runs short because of this, the government has often used public funds to keep it solvent. That shifts part of the cost to text payers, even though the original defaulting companies may never bear the full loss. Depositors also carry part of the risk. After all, the money being lent belongs to them. The system also raises a question of fairness. Two borrowers can miss the same number of loan payments. One is classified as defaulter, loses access to new credit and carries that label in the banking system the other may avoid that outcome if the loan is large enough to qualify for rescheduling or restructuring. The system is not always based on the ability to repay. It often depends on the size of the loan and access to special relief mechanisms. Bangladesh accepted a $4.7 billion IMF loan in 2023 with a commitment to strengthen loan classification rules. One key reform was to classify loans as non performing after three months of missed payments instead of six or nine. Bangladesh Bank has postponed that reform more than once, arguing that the banking sector remains too fragile because of record levels of bad debt. As a result, the stricter standard has yet to take full effect. No law has been broken in this process. Every rescheduling described here was permitted under Bangladesh Bank's own circulars. The loophole is not an accident in the system. It is the system, one relief measure at a time. It is renewed whenever bad debt becomes too large to confront directly. 

The writer is a student at the University of Chittagong