Bangladesh's Banks Post Negative Net Interest Income for the First Time in Six Years

For the first time in at least six years, Bangladesh's listed commercial banks collectively lost money on their core business of lending. Between January and September this year, the net interest income of 27 listed banks came to a combined negative Tk5,624 crore, a sharp reversal from the positive Tk3,016 crore the same banks posted over the same nine months last year. In plain terms, many banks are now paying out more in interest on deposits and borrowed funds than they are earning on loans, a situation bankers and economists describe as unusual for a sector that is supposed to make money from the spread between the two.

• Net interest income across 27 listed banks turned negative, from positive Tk3,016 crore a year earlier to negative Tk5,624 crore in January to September 2026.
• Twenty of the 27 banks saw their net interest income fall, and the number of banks with negative net interest income rose to 10 from six a year ago.
• Net investment income, mostly from government bonds, rose 21 percent to Tk32,622 crore, and is now propping up bank earnings that core lending can no longer support.
• Combined profit still rose, but mainly because loan-loss provisions fell by almost a third, not because banks earned more from their basic business.

Why lending stopped paying

Three forces are squeezing the spread banks earn on loans. Demand for new private sector credit remains weak, so the volume of fresh, income-generating loans is shrinking even as deposit costs stay elevated. At the same time, a large stock of non-performing loans, much of it inherited from the previous Awami League government, generates no interest income at all while still sitting on bank books. And many banks have been shifting money away from private lending into government bonds and treasury bills, trading loan risk for a safer but comparatively modest return.

Shah Md Ahsan Habib, a professor at the Bangladesh Institute of Bank Management, put it bluntly. The overall business scenario of the banking sector is horrible, he said, pointing to a combination of weak lending and continued regulatory forbearance, the practice of allowing banks to delay recognising bad loans on their books.

"It is a dangerous combination," said Ahsan Habib, warning that forbearance rules are letting banks avoid confronting losses that still exist in reality.

Where the profit actually came from

Despite the hole in core lending income, the sector's bottom line did not collapse. Twenty of the 27 banks stayed profitable, with combined profits of about Tk9,600 crore, while the other seven lost a combined Tk13,340 crore or more. BRAC Bank, Pubali Bank, City Bank, Prime Bank and Eastern Bank were among the most profitable, while Islami Bank, National Bank, AB Bank, IFIC Bank and Rupali Bank posted the largest losses.

The reason profits held up is provisioning, not performance. Loan-loss provisions across the 27 banks fell to about Tk6,900 crore from Tk10,000 crore a year earlier, a drop of nearly a third. At the 20 profitable banks alone, provisions fell by Tk3,286 crore, more than the entire Tk2,238 crore increase in their combined profit. Strip out tax effects and a rough calculation puts profit before provisions down around 6 percent, from about Tk17,200 crore to Tk16,150 crore. In other words, lower provisioning, not stronger underlying earnings, is what kept the profit numbers from turning red.

Measure (27 listed banks)	Jan-Sep 2025	Jan-Sep 2026
Net interest income	+Tk3,016 crore	-Tk5,624 crore
Net investment income	Tk26,960 crore (approx.)	Tk32,622 crore
Loan-loss provisions set aside	Tk10,000 crore	Tk6,900 crore
Banks with negative net interest income	6 banks	10 banks
Combined profit, profitable banks	Tk7,362 crore (approx.)	Tk9,600 crore

A warning about window dressing

Mashrur Arefin, managing director of City Bank and chairman of the Association of Bankers, Bangladesh, said private sector credit growth is now running at its lowest level on record, a slowdown that is central to the squeeze on interest income. He also flagged a concern that deserves scrutiny: some of the sharp fall in provisioning could reflect banks writing off bad loans rather than genuinely cleaning up their books, effectively moving problem assets off the balance sheet without resolving the underlying losses. He suggested the central bank examine bank accounts for this kind of window dressing.

Not every bank's story is the same. Dutch-Bangla Bank said its own Tk823 crore drop in provisions reflected a genuine fall in non-performing loans. Prime Bank's chief executive, Faisal Rahman, said his bank's lower provisioning came from improving asset quality, declining bad loans and stronger recoveries. BRAC Bank bucked the trend entirely: its profit rose 38 percent to Tk2,120 crore even as its provisions rose 80 percent to Tk263 crore, and its net interest income climbed 42 percent to Tk1,655 crore, suggesting the bank grew its lending book profitably while still setting money aside prudently. At the other end, the seven loss-making banks set aside only Tk371 crore combined in provisions, including two, Standard Bank and The Premier Bank, that set aside nothing at all, even as they posted losses.

What it means for you

For a saver or depositor, a bank with weak core lending income is not an immediate reason to panic, since deposit insurance and central bank oversight remain in place, but it is a reason to pay closer attention to which bank is holding your money. Banks that are leaning heavily on bond income and light provisioning to report a profit are, by definition, taking on more risk than their income statement alone suggests. If you are comparing fixed deposit rates across banks, it is worth checking a bank's declared non-performing loan ratio and provision coverage alongside the rate itself, since a bank offering an unusually high FDR rate may be chasing deposits to plug a funding gap. You can compare current offers with the site's FDR rate comparison tool, and work out what a given rate actually earns you over time with the FDR and DPS calculator.

For a business owner looking to borrow, the data point that stands out is the slowdown in private credit growth to its weakest pace on record. Banks are not short of money, as the jump in bond holdings shows, but they are increasingly cautious about who they lend it to. That caution is likely to keep lending standards tight and loan approval timelines slow well into next year, regardless of what happens to the central bank's policy rate.

What happens next

Ahsan Habib argues the central bank needs to take a tougher line on wilful defaulters and roll back the regulatory concessions that let troubled borrowers keep their loans classified as current. He also said the government has a role to play in improving the broader business climate, building investor confidence and cutting red tape, changes that would eventually feed through to stronger loan demand and healthier interest income. Until then, expect more banks to lean on government securities and provision reversals to keep their profit lines positive, even as the sector's underlying lending business keeps losing money.