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Bangladesh Bank’s New Loan Waiver Policy: Impact and Challenges

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Bangladesh Bank claimed that if loans outstanding for two years are waived off, the total defaulted loans will come down to Taka 430 billion, which is 2.76 percent of the total loans outstanding in the banking sector. The central bank aims to reduce total outstanding loans to 8 percent of all outstanding loans within 2026. According to Bangladesh Bank, the share of defaulted loans among all outstanding loans stood at 9 percent in December 2024. According to unofficial sources, the amount of defaulted loans exceeds the Central Bank’s estimates.

As of October 2023, Bangladesh ranked second in defaulted loans in South Asia. Bangladesh was followed by Sri Lanka with 13.33 percent, which was about to go bankrupt. Loan default rates in India and Pakistan were 3.9 percent and 7.4 percent of total loans. So, what does setting a target of 8 per cent mean in Bangladesh? There may be room for complacency in Bangladesh Bank, but the chances of a decline in defaulted loans are very low.

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