BSEC Approves Tk 3,500 Crore Bonds
5 banks under pressure because of defaulted loans, plan to issue bonds to raise capital
Graphics: Agamir Somoy
Several institutions in the banking sector, which are under pressure because of excessive volume of defaulted loans and capital shortfalls, are moving toward raising funds through issuing bonds to strengthen their capital.
As part of this, the Bangladesh Securities and Exchange Commission (BSEC) has approved the issuance of bonds worth Tk 3,500 crore for five banks. This information was disclosed in a notice signed by BSEC Executive Director and Spokesperson Md. Abul Kalam.
The banks that received approval are— One Bank, Southeast Bank, BRAC Bank, Al-Arafah Islami Bank, and Bank Asia.
Bangladesh's banking sector is, by and large, under pressure over large amount of defaulted loans and capital shortages. According to the World Bank, at the end of March 2026, the ratio of defaulted loans in Bangladesh's banking sector was 32.6 percent. During the same period, the amount of defaulted loans in the banking sector also increased significantly. According to the World Bank, at the end of December 2025, the banking sector's capital-to-risk-weighted assets ratio (CRAR) was negative 2.6 percent.
The Bangladesh Bank's Financial Stability Report 2025 also revealed a deteriorating picture of the banking sector's capital situation. The report said that at the end of 2025, the banking sector's CRAR was negative 2.64 percent, whereas the minimum required rate under the Basel-III framework is 10 percent.
However, the overall situation of the banking sector is not the same as the financial condition of each individual bank. For example— at the end of June 2025, BRAC Bank's CRAR was 14.50 percent.
In this situation, the banks are trying to increase capital through bonds. One Bank will raise Tk 400 crore, Southeast Bank Tk 800 crore, BRAC Bank Tk 1,000 crore, Al-Arafah Islami Bank Tk 500 crore, and Bank Asia Tk 800 crore, respectively.
The interest rate on the bonds of One Bank, Southeast Bank, and Al-Arafah Islami Bank will be the reference rate + 3 percent. The funds from these bonds will be used to strengthen Tier-2 capital under the Basel-III framework of the banks.
BRAC Bank's 3-year Tk 1,000 crore bond will be a zero-coupon green bond. Its probable discount rate is 8.50 percent. The raised funds will be used for green financing of eligible clients.
On the other hand, the funds from Bank Asia's 7-year Tk 800 crore bond will be used to strengthen Tier-2 capital as well as for financing and refinancing green and sustainable projects.
All the bonds will be issued privately to institutional, high-net-worth, and other eligible investors. The bonds of One Bank, Southeast Bank, and Bank Asia must be listed on the main board of the stock exchange.
Using bonds to strengthen capital in the banking sector is not new. Various banks have received approval to issue bonds before as well.
However, while raising new capital through bonds is helpful in managing capital shortfalls, the problems of defaulted loans, recovery of weak loans, and governance issues of banks need to be addressed separately. The World Bank has also mentioned various structural problems in Bangladesh's banking sector, including weak corporate governance and lending to related parties.
