Bangladesh Bank Mandates Alternative Dispute Resolution for Non-Performing Loan Recovery to Strengthen Dispute Resolution in Banking

The Bangladesh Bank has directed all banks to use ADR mechanisms to recover a minimum of 1.0 percent of their respective non-performing loans by 30 June 2026.

The central bank emphasized the significance of the ADR mechanism in expediting the recovery of default loans and settling disputes outside of the court system. According to the law, parties involved in a case can choose an ADR resolution with court permission before a verdict or order is issued at any stage of the proceedings. With the consent of both the bank and the customer, experienced mediators, such as retired judges, former financial institution officers, lawyers, or any other qualified individuals with a proven track record, registered with the Bangladesh International Arbitration Centre (“BIAC”) or a similar institution can conduct a mediation between the parties. If the mediation proves unsuccessful, both parties have the option to pursue arbitration. To facilitate this, banks can establish memoranda of understanding with organizations like BIAC and other arbitration centers.