Loan Defaulters in the Banking Sector of Bangladesh: Evidence from Social Islami Bank Limited

Abstract

The banking sector is the backbone of Bangladesh because it mobilizes domestic savings and provides credit for development activities. However, the problem of loan defaults or non-performing loans has significantly increased, threatening the existence and profit of many banks. This study focuses on the challenges, implications, and management strategies of loan defaults (NPL) in Bangladesh: the case of Social Islami Bank PLC.According to the industry data, the rate of NPL reached its peak in September 2025, hitting 36% or Tk. 6.44 trillion. It dropped slightly to 32.26% or Tk. 5.89 trillion in March 2026. SIBL also faced severe challenges, with a 61.74% classified investment ratio as of 2024. The high level of NPL can be attributed to several factors, including inappropriate credit appraisal and post-disbursement review, wilful default, political issues, and economic factors. I did my three-month internship in the General Banking (GB) Department of Mohammadpur Branch of SIBL. Thus, I have gained adequate insight into the functioning of the bank and understand the role of General Banking in detail. Additionally, I have knowledge about the account-opening procedure, Mobilizing Monthly Term Deposit Receipt (MTDR) and Deposit Pension Scheme (DPS), KYC norms, AML compliance, and document submission in SIBL. My experience in SIBL helped me realize the importance of General Banking in preventing future loan defaults. The present report includes a complete evaluation of SIBL, including an overview of operations, products/services/customers mix, SWOT analysis, and a brief assessment of the banking sector in Bangladesh, including its size, trends, and maturity levels. It also covers the steps taken by Bangladesh Bank in this regard, and recommendations focus on credit risk management and recovery, including improvements in post-disbursement and monitoring procedures for effective NPL management. The study concludes with critical observations on the banking sector and NPL situation in Bangladesh. This internship created a platform for me to develop a comprehensive understanding of the relationship between General Banking and credit risk management in theory and practice.