Bangladesh Corporate Debt Crisis: 99% Bank Reliance
City Group carries over 26,000 crore taka in bank loans. The system relies almost entirely on credit rather than equity.
City Group has accumulated over 26,000 crore taka in bank loans. The debt is spread across approximately 34 financial institutions. Banks are currently restructuring a significant portion of this exposure. The situation highlights a structural flaw in the local financial system.
Nearly 99 percent of private sector financing in Bangladesh comes from banks. Capital markets contribute only 1 percent to this total. This extreme concentration creates systemic risk. A single corporate default could trigger a broader banking crisis.
Historical parallels in Asia
South Korea faced a similar crisis in the late 1990s. Large conglomerates known as chaebols carried debt-to-equity ratios of five to one. Hanbo Iron and Steel collapsed in January 1997. Kia Motors followed shortly after. Cross-guarantees between firms amplified the contagion.
Daewoo collapsed two years later. The Korean government responded by forcing deleveraging. It improved disclosure and governance standards. The push shifted focus toward capital markets. Bangladesh has not implemented similar structural reforms yet.
Capital market underdevelopment
Industrial term-loan disbursements reached 97,138 crore taka in fiscal year 2025. Companies raised only 302 crore taka through IPOs and rights issues in the same period. The Dhaka Stock Exchange market capitalization sat at 5.7 percent of GDP in June. This is the lowest ratio in South Asia.
A World Bank survey found that 0.5 percent of Bangladeshi businesses view equity as a viable funding option. The figure is 6.9 percent in India. Bank loans are faster and require less public scrutiny. Equity financing involves strict compliance and shareholder oversight.
Regulatory barriers to equity
Family-run businesses often avoid listing due to compliance burdens. Kamran T Rahman of the Metropolitan Chamber of Commerce notes that companies prefer debt. He suggests the government should loosen listing requirements. Incentives are needed to make public listing attractive. The current framework makes debt the default option.
