The government is extending a state-guaranteed loan of Tk2,000 crore to Rajshahi Krishi Unnayan Bank (RAKUB) in order to save the financially distressed specialized bank from bankruptcy, according to the Treasury and Debt Management (TDM) Department of the Ministry of Finance.

Due to recurring annual losses and non-performing loans (NPLs) exceeding its capital, a decision had previously been taken to merge RAKUB with another specialized institution—Bangladesh Krishi Bank (BKB). Sources said that although Bangladesh Bank had initially decided on the merger, RAKUB is now taking a Tk2,000 crore refinancing loan directly from Bangladesh Bank. The Ministry of Finance is acting as guarantor on behalf of the government.

Earlier, state guarantees had also been provided against loans granted to the struggling bank. However, as RAKUB failed to repay those loans on time, the repayment deadlines had to be extended. Reportedly, the bank had taken a Tk1,000 crore loan from Bangladesh Bank’s “Special Agricultural and Rural Credit” program. Since RAKUB could not repay the loan when it matured in August, the repayment deadline has been extended to 31 August, 2026. Now, once again, the Finance Division has made a policy decision to provide a fresh state guarantee for the new Tk2,000 crore loan from the central bank. This decision was officially conveyed through a letter from the Ministry of Finance on 8 September.

When asked about the matter, Md. Rashedul Amin, head of the Treasury and Debt Management (TDM) Wing, told Bangladesh Pratidin that without the loan, the bank would have gone bankrupt and would not have been able to carry out any lending operations. Responding to questions on why a new loan was being granted despite the bank’s failure to repay its earlier loans, the TDM official explained that since this specialized bank provides loans for agricultural production activities, the government had made a policy decision to extend refinancing facilities in order to protect production.

Asked whether recurring bailouts and capital support could prevent collapse without merging RAKUB with BKB, the official said that the Financial Institutions Division is responsible for monitoring the bank’s operations and would determine if a merger is necessary. Since the merger has not yet been implemented, the government decided instead to provide loans to keep RAKUB operational. However, the loan has been tied to several conditions.

Officials stated that the two main conditions are expanding business operations and reducing non-performing loans. Additionally, the bank has been instructed to submit a detailed action plan for efficient management to the Financial Institutions Division within a month. They also warned that if RAKUB fails to repay the earlier loans on time, no further guarantees will be provided.

Still, doubts remain over how effective this warning will be. A review of past data shows that 21 percent of RAKUB’s disbursed loans are non-performing. Moreover, the bank has been collecting deposits at high interest rates while lending at government-mandated low interest rates, leading to years of losses. In recent years, its accumulated losses have reached Tk1,582 crore.

Observers point out that RAKUB’s ambitious activities contributed to these losses. For instance, funds refinanced for low-interest agricultural loans were instead channeled into lending to cold storage owners and auto rice mill owners in the northern region. By the end of December last year, RAKUB had disbursed loans totaling Tk7,178 crore, of which Tk1,451 crore were non-performing. Unable to recover its loans, the Rajshahi Krishi Unnayan Bank is now surviving only by taking on new debt as it teeters on the brink of bankruptcy.