[🇧🇩] Banking System in Bangladesh

[Saif]

Bangladesh Bank governor agrees to reschedule Bashundhara’s loan

Bangladesh Bank Governor Ahsan H Mansur has agreed to allow Bashundhara Group to restructure its loan ‘if proper procedures are followed’. Central bank spokesperson Arif Hossain Khan said Bashundhara Group Chairman Ahmad Akbar Sobhan met the governor on Thursday, where they discussed t

thefinancialexpress.com.bd

Bangladesh Bank governor agrees to reschedule Bashundhara’s loan
bdnews24.com
Published :
Mar 07, 2025 20:50
Updated :
Mar 07, 2025 20:50

Bangladesh Bank Governor Ahsan H Mansur has agreed to allow Bashundhara Group to restructure its loan ‘if proper procedures are followed’.

Central bank spokesperson Arif Hossain Khan said Bashundhara Group Chairman Ahmad Akbar Sobhan met the governor on Thursday, where they discussed the loan rescheduling issue.

The meeting also involved Bangladesh Bank Deputy Governors Zakir Hossain Chowdhury and Kabir Ahmed.

Sobhan was accompanied by Ahmed Jamal, the group's advisor and former deputy governor of the central bank.

“He [Sobhan] came to the governor and said they are not in default with any bank,” Bangladesh Bank spokesperson told bdnews24.com on Friday.

Sobhan informed the governor that the Criminal Investigation Department, or CID’s, report on money laundering had caused problems for them both at home and abroad.

He also pointed out that this had strained their relationships with banks.

Arif said, “The governor told him that these reports have no connection with Bangladesh Bank. If he [Sobhan] wishes to reschedule the loan, he can, but a down payment will be required.”

“He must make the down payment as per regulations. If he does, it will also benefit banks facing liquidity crises.”

The spokesperson continued, “Bangladesh Bank has already set policies for commercial banks on how they can reschedule loans.

“Therefore, no approval from the central bank is needed for Bashundhara Group to proceed with loan rescheduling.”

The governor also confirmed that Bangladesh Bank would not shut down any business, including Beximco.

He emphasised that it is the central bank’s job to encourage businesses.

“If the required down payment is 10 percent, but the client says they can only pay 5 percent, the bank will send the matter to Bangladesh Bank for approval, which may or may not be granted,” Arif said.

He added that Bangladesh Bank would review how many banks Bashundhara Group is involved with.

The central bank may hold another meeting with the business conglomerate at a later time.

The spokesperson said, "The governor told him [Sobhan] that no company accounts have been frozen so far, only individual accounts have been frozen."

An official from Bangladesh Bank said Sobhan clarified that his four sons operate separate businesses and have taken loans from different banks.

As a result, their loans do not exceed the limit for a single customer.

He continued, “Bangladesh Bank responded by saying that, according to [Registrar of Joint Stock Companies] Form-12, his name appears as the chairman of all the companies. Therefore, they will not be considered separate groups.”

“The loan must be reduced to the prescribed limit, following the proper regulations,” the official concluded.​

 

[Saif]

Remittances through agent banking rises to Tk 1,73,390cr

Disbursement amount of inward remittances through agent banking rose 21.16 per cent to Tk 1,73,390.72 crore at the end of December 2024.

www.newagebd.net

Remittances through agent banking rises to Tk 1,73,390cr
Bangladesh Sangbad Sangstha . Dhaka 07 March, 2025, 21:53

Disbursement amount of inward remittances through agent banking rose 21.16 per cent to Tk 1,73,390.72 crore at the end of December 2024.

At the end of December 2023, the figure was Tk 143,113.28 crore, which increased in September 2024 to Tk 165,659 crore, according to the quarterly report on agent banking published by the Bangladesh Bank (BB).

In September 2024 quarter, the amount of inward remittances collected and disbursed by agents has increased by 4.67 percent over the previous quarter.

Talking to BSS, a senior official of the central bank said this increase in inward remittances through agent banking is supposed to be a positive outcome of the government’s initiative of providing 2.5 per cent cash incentive on inward remittances.

Moreover, banks’ financial literacy campaigns focusing on the theme ‘Enhance Social Awareness to send Remittance through Legal Channel’, announced by Bangladesh Bank is expected to have a positive impact on remittance inflow, he added.

He said agents are contributing promisingly in this regard since customers are likely to get doorstep banking services within shortest possible time.

Thus, Agent Banking is becoming popular channel for inward remittance distribution, he added.

According to the report, agent banking accounts opened in rural areas have always been the major recipients of the remittance disbursed, as they received 90.12 percent of December 2024’s total.

Of the total, only around 10 percent or Tk 7,731 crore was received by those with agent banking accounts in urban areas.

The top five banks have 95.75 per cent share of the total inward remittances distributed through agent banking till December 2024. Islami Bank Bangladesh PLC ranks the top with Tk 92,300.11 crore, which is 53.23 per cent of the total inward remittances distributed through agent banking.

Dutch-Bangla Bank PLC distributed 26.92 per cent while Bank Asia PLC 7.98 per cent, Al-Arafah Islami Bank PLC 4.43 percent and Agrani Bank PLC 3.19 percent.

Abdul Quaium Chowdhury, deputy managing director of Premier Bank PLC, said that the rising trend of agent banking, especially in rural areas, indicates that there is a remarkable potential to bring the rural unbanked people under the umbrella of formal banking services.

He said the flow of remittances into the country shows upward trend as the government has taken measures to streamline the legal channel for encouraging non-resident Bangladeshis (NRBs) to send money to the country.

Bangladesh Bank introduced agent banking in Bangladesh in 2013 with a view to providing a safe alternate delivery channel of banking services. The targeted customers of this service were the under-served population who generally live in geographically remote locations that are hard to reach by the formal banking networks.

Customers can avail various banking services including deposits, loans, overseas and local remittances, payment services (such as utility bills, taxes), and receiving government social safety-net benefits through agent banking outlets.

This model is thus gaining popularity as a cost-effective and convenient delivery channel to the mass people who would otherwise have remained beyond the reach of conventional banking services.

Banks are operating their agent banking activities in line with the Prudential Guidelines for Agent Banking Operation in Bangladesh, issued by Bangladesh Bank on 18 September 2017, covering various aspects, including the agent approval process, permissible activities, responsibilities of the banks and the agents.

It also focuses on the requirements for anti-money laundering and combating financing of terrorism (AML/CFT), and customer protection and business continuity to facilitate safe and effective proliferation of agent banking in the country.​

 

[Saif]

Fixing the problems of Islamic banks

Despite various criticisms, Islamic banking has been growing continuously worldwide for a long time due to its profit-risk sharing structure, inclusiveness, and real asset-backed transactional features. This growth signifies the potential of Islamic banking to transform the financial landscape. Isl

thefinancialexpress.com.bd

Fixing the problems of Islamic banks
Asjadul Kibria
Published :
Mar 08, 2025 22:55
Updated :
Mar 08, 2025 22:55

Despite various criticisms, Islamic banking has been growing continuously worldwide for a long time due to its profit-risk sharing structure, inclusiveness, and real asset-backed transactional features. This growth signifies the potential of Islamic banking to transform the financial landscape. Islamic banking is defined as a banking system that is in line with the spirit, ethic, and value system of Islam and governed by the principles laid down by Islamic Shariah. That's why Islamic banking or financial services is described as 'shariah-compliant'. It avoids interest, encourages partnership, and rejects harmful investment, offering a hopeful alternative to conventional banking.

Islamic banking is thus described as the transformation of conventional money lending into transactions based on tangible assets and real services. There are some shortcomings in Islamic banking for obvious reasons. Nevertheless, today, it is an industry worth more than US$4.0 trillion spread over more than 80 countries worldwide, although highly concentrated in 10 countries with a Muslim majority, including Bangladesh.

More than four decades ago, Islamic banking activities started in Bangladesh by opening the first branch of Islami Bank Bangladesh Ltd in Dhaka. Today, there are 10 full-fledged Islamic banks in the country operating with 1,697 branches. In addition to this, 34 Islamic banking branches of 16 conventional commercial banks and 825 Islamic banking windows of 20 conventional commercial banks are also providing Islamic financial services in the country, according to Bangladesh Bank statistics.

However, Islamic banking activities in the country passed another gloomy year in 2024, mainly due to poor governance and irregularities in some major banks. The decline in the market share of the Islamic banks to the total banking industry indicates the overall weakness of the sector. At the end of December 2024, the share of Islamic banks in the country's total banking industry was 24.75 per cent in deposits, which was 25.35 per cent at the end of December 2023. In terms of investment, which is loan and advance in conventional banking terms, the ratio stood at 28.15 per cent at the end of last year against 28.92 per cent at the end of 2023.

Despite a strong public demand for Islamic financing, Islamic banking in Bangladesh has faced significant challenges in the last decade, largely due to the turmoil in the country's overall financial sector. The previous regime, led by Hasina, was accused of systematically distorting the country's financial sector, especially the banks, by allowing scams, corruption, and irregularities. This regime's actions, including undermining Islamic financing, have significantly impacted the health of the Islamic banks.

An oligarch, closely associated with the ousted Hasina regime, literally grabbed the major Islamic banks only to deteriorate the health of the banks. In the name of removing the anti-liberation force from the country's pioneer and leading Islamic bank, Islami Bank Bangladesh PLC (IBBL), to be precise, the Hasina regime backed the Chattogram-based oligarch to take over the bank, defying all rules and norms in 2017. Despite being the country's central bank, Bangladesh Bank played a shameful role in this regard by allowing the forceful transfer of ownership and management in an unprecedented manner. Foreign investors also left the bank gradually. The bank has also started to go through a series of irregularities, weakening its financial strength and eroding its reputation. As IBBL alone shares around one-third of the Islamic banking industry's total deposit and investment, any disturbance in the bank negatively affects the whole industry. Nevertheless, IBBL has developed a solid foundation for over three decades and has attained customer trust for long. That's why, despite the persistent assault on the bank since 2017, its operation could not be stopped. The oligarch also grabbed three more Islamic banks and also put those under serious trouble.

A section of economists and intellectuals, unconditionally loyal to the Hasina regime, started a virulent campaign against overall Islamic finance in general, especially before the national parliament election in 2013. They argued that there was no such thing as Islamic financing or interest-free banking and alleged that the country's Islamic banks are deceiving people. Some of them also produced research papers to show that these banks are financing religious fundamentalism in the country. They particularly targeted the IBBL, alleging that the anti-liberation force operated the bank. Some leading newspapers and media also joined the campaign without trying to understand the nature and structure of Islamic finance. In this process, Hasina-loyalist intellectuals created a hostile atmosphere for Islamic financing in the country. These intellectuals, however, raised little voice against the persistent state-backed irregularities in the country's banking sector. Even a few of them were involved in some severe irregularities like foreign exchange reserve heist, BASIC Bank scam, Hall-Mark scam in Sonali Bank, and AnonTex Group fraud in Janata Bank.

Again, some of the politicians of Bangladesh Awami League and the partisan intellectuals spread Islamophobia over the last decade and used it as a tool against the country's Islamic financing. The net result is bad governance in Islamic banks, leading to various mismanagement and corruption in the sector.

Undoubtedly, Islamic banking in Bangladesh is not free from flaws. Some bankers, businessmen, and investors also misuse Islamic financing and exploit depositors and ordinary people. This misuse underscores the urgent need for better regulation in the industry. The previous government's distorted attitude towards Islamic financing was a serious obstacle to properly controlling the sector. The absence of necessary policies to support Islamic financing has worsened the situation further. For instance, despite repeated calls for introducing Shariah-compliant instruments to manage the liquidity crisis of the Islamic banks, the central bank did not take any effective steps. Thus, the excess liquidity of the Islamic banks in terms of total liquidity in the banking sector dropped to 4.40 per cent at the end of the last year and from 15.42 per cent at the end of 2021.

As the interim government has been trying to fix the problems of the country's overall banking sector, it's crucial that Islamic banks are also included in the process. As a critical part of the country's overall financial system, the banks require adequate attention for proper functioning. The role of the Islamic banks in the financial system is significant, and their proper functioning is essential for the stability and growth of the economy.​

 

[Saif]

https://thefinancialexpress.com.bd/economy/adb-lending-500m-bailout-for-bd-banks

ADB lending $500m bailout for BD banks
Dozen banks in disarray for forged lending, NPL buildups
FHM HUAMAYN KABIR
Published :
Mar 15, 2025 00:52
Updated :
Mar 15, 2025 00:52

Bangladesh's interim government hopes to get a US$500-million bailout package from the ADB for the banking sector as some banks seemed in disarray following past forged lending and NPL buildups.

The government has already completed negotiations with the Asian Development Bank (ADB) for the policy-support loan and it is expecting the financial support at the first go next month, Economic Relations Division (ERD) officials said Friday.

"We have completed discussion with the ADB. The lender is convinced for Bangladesh's ongoing reforms in the financial and relevant sectors. Now it has decided to provide the funds for facilitating further reforms in the banking sector," a senior ERD official told the FE correspondent.

"We are expecting that the budgetary-support proposal will be cleared at the ADB board meeting in April and then a loan agreement would be signed immediately," he added.

Bangladesh's financial sector has been destroyed by the ousted Sheikh Hasina government and her associates through violating the banking regulations, looting hundreds of billions of takas and laundering billions of dollars, the officials deplored.

The banking-sector non-performing loans (NPLs) are rated to be on the highest level in the history of Bangladesh.


The ratio of NPLs had reached 20.20 per cent of the total outstanding loans in the banking sector till December last year, central bank's data showed.

Some corporates, seen as lackeys of the past Hasina government, borrowed huge money from banks but did not pay back the loans, which weakened the financial institutions and their operations.

"At least a dozen commercial banks appear in the red category for their vulnerability with their huge NPLs, deposit shortfalls and scams in operations," said the official.

Another ERD official says the proposed $500 million will be under the subprogramme-1 of the "Banking-sector reform-policy-based lending" by the ADB.

Another $500 million (Subprogramme-2) is likely to be processed after the success of this sub-programme, he added.

The Manila-based lender has already provided some reform proposals to the Bangladesh government regarding the financial sector and relevant others for getting the budgetary support, the ERD official said.

Meanwhile, on December 18 last year, the ADB confirmed $600 million worth of budget support titled 'Strengthening Economic Management and Governance Programme, Subprogramme 1' to support Bangladesh's preparation for graduation from the least-developed country (LDC) status.​

 

[Saif]

Transforming banking with digital innovation

The banking industry is profoundly transformed by changing customer behaviour, technological advancements, and competitive pressures.

www.thedailystar.net

Transforming banking with digital innovation

The banking industry is profoundly transformed by changing customer behaviour, technological advancements, and competitive pressures. Customers are increasingly demanding personalised, convenient, and transparent services. They expect seamless interactions across digital platforms and are more willing than ever to switch service providers if their needs are not met. Fintech companies, with their customer-centric digital offerings, have set new standards, pushing traditional banks to innovate.

The journey towards smart and digital banking begins with a thorough assessment of the bank's existing technology stack. It is crucial to evaluate architecture flexibility, cloud deployment models, and integration capabilities. Migrating data from legacy systems to modern core banking solutions can help streamline operations and improve efficiency. Banks must prioritise the implementation of interfaces that facilitate seamless integration with other business applications to enhance functionality and customer experience.

To compete effectively, banks need to develop a roadmap of products and services aligned with market best practices. This involves leveraging digital tools and technologies to provide personalised customer service, enabling customer self-resolution, and digitising processes to achieve faster processing times. Digital transformation is not just about technology; it's about redefining customer engagement. Banks must adopt multi-channel marketing strategies to improve customer interactions and conversion rates. Centralising and scaling client acquisition infrastructure can enhance wealth management penetration and drive incremental revenue. By utilising customer analytics and segmentation techniques, banks can gain deeper insights into customer behaviours, enabling tailored offerings that meet specific needs.

A successful digital transformation requires a modular architecture approach and customer experience transformation. Delivering a first-rate digital experience can significantly reduce IT running costs and drive incremental revenue through new product offerings. Establishing a "single customer view" can provide a data foundation for understanding customer segments, unlocking opportunities for increased sales and conversion.

Foundational technologies, such as blockchain, AI, and cloud intelligence, play a pivotal role in enabling digital banking. Banks should explore blockchain for secure, transparent transactions and AI for enhanced customer service and risk management. Cloud intelligence facilitates easier integrations, allowing banks to establish platforms for new business journeys or enhance existing ones. Integrating robust data governance, warehousing, lake house architectures, and business intelligence into a bank's digital strategy enhances growth and innovation. A comprehensive data governance framework not only ensures data integrity, compliance, and security but also fosters a culture of accountability and transparency.

As banks move towards digital platforms, cybersecurity becomes a paramount concern. Banks need to invest in state-of-the-art security technologies to protect against cyber threats and data breaches. Implementing advanced encryption protocols, multi-factor authentication, and regular security audits can fortify digital banking infrastructure. Additionally, banks should incorporate AI-driven threat detection systems to proactively identify and mitigate potential risks.

Digital transformation in banking also involves navigating complex regulatory environments. Banks must ensure compliance with evolving regulations while maintaining agility in their operations. A successful digital transformation requires a cultural shift within the organisation. Banks must foster a culture of innovation, agility, and collaboration. Encouraging cross-functional teams and leveraging digital innovation workshops can inspire creativity and drive change. By aligning on a North Star vision, banks can guide future decisions and inspire excitement for the possibilities that digital channels and AI can bring.

The path to becoming a true digital bank is multifaceted, involving strategic planning, technological innovation, and cultural transformation. By embracing digital tools, optimising operations, and prioritising customer experience, banks can position themselves as leaders in the financial services industry. As the digital landscape continues to evolve, banks must remain agile, continuously adapting their strategies to meet the ever-changing needs of their customers. Through a comprehensive digital transformation, banks can secure their future and thrive in the digital age.

The writer is the chairman at Financial Excellence Ltd​

 

[Saif]

12 banks to get new managing directors

Some 10-12 banks in the private sector are going to get new MDs. They will be appointed gradually in the next two years

en.prothomalo.com

12 banks to get new managing directors
Shanaullah Sakib
Dhaka
Updated: 15 Mar 2025, 14: 43

Some 10-12 banks in the private sector are going to get new managing directors (MDs). They will be appointed gradually in the next two years.

The move came in the context that several experienced MDs are going to retire soon. The list includes the MDs of BRAC Bank, Dutch-Bangla Bank, Mutual Trust Bank, Eastern Bank and Midland Bank.

At the same time, MDs of six banks, which are on verge of being dissolved due to irregularities, have been sent on enforced leaves. It is highly unlikely that they would return. They are likely to step down before completing their terms.

So, these 10-12 banks will see new faces in the top post, relevant banking sector sources say.

According to the Bangladesh Bank policy, although the age limit for bankers is 59 years, MDs can serve until 65 years maximum. The MD must have 20 years of experience as a banker and might be over 45 years of age.

The search of efficient MDs

Although the bank owners would exert influence to appoint corrupted persons in the MD posts in the past, the central bank is not allowing this to happen anymore. The Bangladesh Bank has prepared a new policy to prevent controversial bankers like PK Halder or ABM Mokammel Haque Chowdhury from taking over.

Now, a MD candidate will have to make a commitment to reach the commercial target of the bank and pass a viva at the central bank. Each of these MDs will be in charge for three years, which was five years during the term of the previous government.

Relevant persons say although many are interested in the MD post given the hefty salary, other facilities and the power associated with it, a very few of the bankers get the opportunity. Most of the incumbent private bank MDs started their careers with foreign banks. The same goes for many of the deputy managing directors (DMDs). They are also interested in the top post.

Speaking to several private bank entrepreneurs, it has been learnt the bank business is under a tough challenge due to the endless irregularities and forgery in the sector in the last 15 years. Therefore, everyone is looking for efficient persons with a good image for these posts.

However, officials with such criteria are rare in the local banks. So contacts have been made with Bangladeshi bankers at top positions in foreign banks. There has already been some progress in this regard. Singapore-based international banking and fintech consultancy agency Asia FIIT co-founder Osman Ershad Fayez has already joined the Eastern Bank as an additional MD. He also served as the MD and chief executive director at Standard Chartered Singapore. Another bank is in talks with a banker who served as the chief executive of Standard Chartered Bank’s operations in Bangladesh.

The banks to have new MDs

It has been learnt that Dutch-Bangla Bank Limited (DBBL) MD Abul Kashem Md Shirin will retire on 6 February next year. He took charge of the bank in 2016. The term of Midland Bank MD Ahsan-Uz Zaman ends on 24 February, next year. He has been serving the bank as the MD since 2014.

BRAC Bank MD Selim RF Hossain will retire on 4 March next year. He was also the MD of IDLC Finance from 2010 to 2015. He was appointed the BRAC Bank MD in October, 2015. Easter Bank Limited MD Ali Reza Iftekhar will end his term on 19 April, 2026. He has been in the post since 2007.

Mutual Trust Bank managing director Syed Mahbubur Rahman will retire on 16 February 2027. He became the MD of the bank in 2010. He also worked with the BRAC Bank and Dhaka Bank. He was the only one among the private bank MDs, who was vocal against different irregularities and corruption in the banking sector in the last 15 years.

These soon to be retired MDs have been in the leadership of Association of Bankers Bangladesh, an organisation of managing directors in the banking sector. They are also known as influential bankers. They have roles in legislation of different laws and policies of the banking sector.

Apart from that, Community Bank managing director Mashihul Haque Chowdhury has already retired. The recruitment procedure for a new MD at the bank is underway. The term of Citizens Bank MD Mohammad Masum ended last 27 February. The board of directors of the bank has decided to appoint Bank Asia deputy managing director (DMD) Alamgir Hossain as the MD. The appointment will be finalised upon approval from the central bank.

Sheikh Mohammad Maruf joined as the MD of Dhaka Bank in October last year. Before that, he served as the additional MD at City Bank. There have been discussions that several of the vacant posts of MDs are to be filled up by the additional MDs of different banks.

Meanwhile, international auditors started surveys on the six week banks under vulnerable situations due to irregularities in January. The MDs of these banks have sent on forced leaves for three months for this. The six banks are – First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, Exim Bank and ICB Islami Bank.

Former executive director of Bangladesh Bank Md Humayun Kabir has already joined as the Union Bank MD. The ICB Islami Bank board of directors has proposed the name of former central bank executive director Anwarul Islam for the MD post. Meanwhile, former Shahjalal Islami Bank officials M Akhter and Abdul Aziz have joined the Exim Bank as additional MDs.

Speaking to Prothom Alo regarding this, DBBL managing director Abul Kashem Md Shirin said, “My term as the MD ends next year. Before that, I want to further strengthen the bank.”

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu​

 

[Saif]

Banking reforms on the move

The Bangladesh Bank has embarked on a series of banking reforms with quiet determination. Most recently, it has tightened regulations regarding dividend payouts by scheduled banks, exemplifying the strategy of seizing low-hanging fruit in the pursuit of structural reforms.

www.thedailystar.net

Banking reforms on the move

The Bangladesh Bank has embarked on a series of banking reforms with quiet determination. Most recently, it has tightened regulations regarding dividend payouts by scheduled banks, exemplifying the strategy of seizing low-hanging fruit in the pursuit of structural reforms.

Concurrently, an announcement was made to establish four new departments at the BB head office to bolster its operations and enhance oversight of the financial sector.

Just a few days prior, BB reformed the exit policy for non-performing loans (NPLs), specifically targeting defaulters who were not deemed to have failed in repayment due to wilful neglect or deceptive practices to evade payment.

The new regulations introduced by the BB, combining firmness with strategic leniency, lay the groundwork for a sturdy financial system. This article focuses on the most recent reform concerning dividend payouts, an addition to BB's collection of quickly attainable yet impactful initiatives.

Observed dividend practices

Banks notorious for holding not just bad loans but also poor cash placements have distributed dividends amounting to 10 percent or more of their net paper profits after tax. These profits, termed as 'paper' due to their origins in creative accounting and lenient regulatory oversight, do not reflect real earnings.

Out of the 61 banks in Bangladesh, merely five achieved net profits exceeding Tk 1,000 crore in 2024, primarily due to a flight to safety amidst financial instability. The net interest income, typically the main revenue source for banks, paled in comparison to the returns from government securities.

Depositors shifted funds to institutions perceived as more secure, prioritising financial safety over profitability. Growth of nonperforming loans has outpaced deposit growth for longer than old, aged memories can recall.

Yet, practices in listed banks of Bangladesh show an increasing trend in dividend payments. This is puzzling with pieces that just don't fit together. In a system plagued by tight liquidity, pervasive insolvency, and shaky confidence, positive and often high (above 10 percent) dividend yields observed in reality for a large number of listed financial corporates challenge understanding the drivers of their dividend policy.

Politically influential individuals took out funds and laundered them abroad. At the end of 2024, over one-fifth of the total loans in the banking sector were sour, largely due to embezzlement by owners. Distressed assets are probably two and a half to three times the reported NPLs.

This does not prevent cash dividends. On the contrary, there is a significant and positive association between business risk and dividend payout ratio in the banking sector. Banks with higher business risks tend to pay higher dividends.

This reflects a "milking the property" strategy. Several banks appear to be prioritising dividend payments over maintaining financial stability.

Towards better prudence

These practices exacerbate the long-term damage to banks already weakened by fraud and defaults. For commercial banks, a sound dividend policy is essential for maintaining a robust capital base to absorb potential losses and comply with regulatory capital requirements. During times of economic and political instability, such as those we currently face on a daily basis, a conservative dividend policy that emphasises retaining earnings is imperative.

BB's new dividend policy could reportedly restrain 23 out of 61 banks from making dividend payouts at the risk of depositors' and minority shareholders' interests. Banks that have taken a deferral facility to maintain provisioning requirements cannot pay dividends, nor can those with NPLs exceeding 10 percent of their total loans or incurring penalty or fine due to shortfall in the cash reserve ratio and statutory liquidity ratio.

Cash dividends are restricted to the profits generated within the current calendar year; they cannot be distributed from past accumulated profits. Banks that maintain a risk-adjusted capital adequacy ratio (CAR) of at least 15 percent can issue cash and stock dividends up to 50 percent of their net profit after tax. This limit drops to 40 percent if the CAR is between 12.5 percent and 15 percent. No cash dividends can be paid if the CAR falls between 10 percent and 12.5 percent.

Such tightening is particularly warranted when the BB is pressed to provide liquidity support to distressed banks. After the political changeover last year, the BB provided money to troubled banks to prevent a bank run. It has provided around Tk 25,000 crore in liquidity support to ensure they could meet withdrawal demands.

The BB needed to make sure such withdrawals do not include cash dividends paid by liquidity and capital-constrained banks. The crisis-hit banks are yet to repay the funds to the BB. Further asset quality deterioration is on the cards with declining growth, high inflation, and continuing social unrest.

The dividend payout reform encourages banks to retain earnings. By prioritising protecting depositors from potential risks, it should help banks navigate challenging economic conditions by promoting financial prudence.

Readiness for deeper reforms

Although the new regulation might initially face backlash in the stock market, particularly from short-term-focused investors, their long-term advantages for both the economy and the market are remarkable. Enhancing banks' capital foundations will strengthen the overall health of the banking sector.

These measures align with the upcoming tighter NPL recognition criteria and the simplified provisioning framework set to be implemented this April. They also complement the Prompt Corrective Action (PCA) framework announced in December 2023 with a commitment to implement by end March 2025. The PCA outlines specific strategies for addressing banks based on the severity of their balance sheet issues.

Currently, it is hoped that banks can no longer leverage political protection to operate as freely with impunity as they did under the previous regime. Now is opportune moment for reforming the prudential framework encompassing dividend payments, NPL recognition, provisioning requirements, and disciplined exits.

Those disadvantaged by these reforms are currently at a significant political disadvantage. The call for financial stability has never been stronger, both from local stakeholders and international partners.

These reforms are especially handy as comprehensive efforts to overhaul the banking system, including the BB, are in progress, albeit still in their infancy. The impact of these changes will become more apparent once a substantial number of reforms have been sustainably implemented over time.

The writer is a former lead economist of the World Bank's Dhaka office​

 

[Saif]

Reforms on the move

The Bangladesh Bank has embarked on a series of banking reforms with quiet determination. Most recently, it has tightened regulations regarding dividend payouts by scheduled banks, exemplifying the strategy of seizing low-hanging fruit in the pursuit of structural reforms.

www.thedailystar.net

Reforms on the move

The Bangladesh Bank has embarked on a series of banking reforms with quiet determination. Most recently, it has tightened regulations regarding dividend payouts by scheduled banks, exemplifying the strategy of seizing low-hanging fruit in the pursuit of structural reforms.

Concurrently, an announcement was made to establish four new departments at the BB head office to bolster its operations and enhance oversight of the financial sector.

Just a few days prior, BB reformed the exit policy for non-performing loans (NPLs), specifically targeting defaulters who were not deemed to have failed in repayment due to wilful neglect or deceptive practices to evade payment.

The new regulations introduced by the BB, combining firmness with strategic leniency, lay the groundwork for a sturdy financial system. This article focuses on the most recent reform concerning dividend payouts, an addition to BB's collection of quickly attainable yet impactful initiatives.

Observed dividend practices

Banks notorious for holding not just bad loans but also poor cash placements have distributed dividends amounting to 10 percent or more of their net paper profits after tax. These profits, termed as 'paper' due to their origins in creative accounting and lenient regulatory oversight, do not reflect real earnings.

Out of the 61 banks in Bangladesh, merely five achieved net profits exceeding Tk 1,000 crore in 2024, primarily due to a flight to safety amidst financial instability. The net interest income, typically the main revenue source for banks, paled in comparison to the returns from government securities.

Depositors shifted funds to institutions perceived as more secure, prioritising financial safety over profitability. Growth of nonperforming loans has outpaced deposit growth for longer than old, aged memories can recall.

Yet, practices in listed banks of Bangladesh show an increasing trend in dividend payments. This is puzzling with pieces that just don't fit together. In a system plagued by tight liquidity, pervasive insolvency, and shaky confidence, positive and often high (above 10 percent) dividend yields observed in reality for a large number of listed financial corporates challenge understanding the drivers of their dividend policy.

Politically influential individuals took out funds and laundered them abroad. At the end of 2024, over one-fifth of the total loans in the banking sector were sour, largely due to embezzlement by owners. Distressed assets are probably two and a half to three times the reported NPLs.

This does not prevent cash dividends. On the contrary, there is a significant and positive association between business risk and dividend payout ratio in the banking sector. Banks with higher business risks tend to pay higher dividends.

This reflects a "milking the property" strategy. Several banks appear to be prioritising dividend payments over maintaining financial stability.

Towards better prudence

These practices exacerbate the long-term damage to banks already weakened by fraud and defaults. For commercial banks, a sound dividend policy is essential for maintaining a robust capital base to absorb potential losses and comply with regulatory capital requirements. During times of economic and political instability, such as those we currently face on a daily basis, a conservative dividend policy that emphasises retaining earnings is imperative.

BB's new dividend policy could reportedly restrain 23 out of 61 banks from making dividend payouts at the risk of depositors' and minority shareholders' interests. Banks that have taken a deferral facility to maintain provisioning requirements cannot pay dividends, nor can those with NPLs exceeding 10 percent of their total loans or incurring penalty or fine due to shortfall in the cash reserve ratio and statutory liquidity ratio.

Cash dividends are restricted to the profits generated within the current calendar year; they cannot be distributed from past accumulated profits. Banks that maintain a risk-adjusted capital adequacy ratio (CAR) of at least 15 percent can issue cash and stock dividends up to 50 percent of their net profit after tax. This limit drops to 40 percent if the CAR is between 12.5 percent and 15 percent. No cash dividends can be paid if the CAR falls between 10 percent and 12.5 percent.

Such tightening is particularly warranted when the BB is pressed to provide liquidity support to distressed banks. After the political changeover last year, the BB provided money to troubled banks to prevent a bank run. It has provided around Tk 25,000 crore in liquidity support to ensure they could meet withdrawal demands.

The BB needed to make sure such withdrawals do not include cash dividends paid by liquidity and capital-constrained banks. The crisis-hit banks are yet to repay the funds to the BB. Further asset quality deterioration is on the cards with declining growth, high inflation, and continuing social unrest.

The dividend payout reform encourages banks to retain earnings. By prioritising protecting depositors from potential risks, it should help banks navigate challenging economic conditions by promoting financial prudence.

Readiness for deeper reforms

Although the new regulation might initially face backlash in the stock market, particularly from short-term-focused investors, their long-term advantages for both the economy and the market are remarkable. Enhancing banks' capital foundations will strengthen the overall health of the banking sector.

These measures align with the upcoming tighter NPL recognition criteria and the simplified provisioning framework set to be implemented this April. They also complement the Prompt Corrective Action (PCA) framework announced in December 2023 with a commitment to implement by end March 2025. The PCA outlines specific strategies for addressing banks based on the severity of their balance sheet issues.

Currently, it is hoped that banks can no longer leverage political protection to operate as freely with impunity as they did under the previous regime. Now is opportune moment for reforming the prudential framework encompassing dividend payments, NPL recognition, provisioning requirements, and disciplined exits.

Those disadvantaged by these reforms are currently at a significant political disadvantage. The call for financial stability has never been stronger, both from local stakeholders and international partners.

These reforms are especially handy as comprehensive efforts to overhaul the banking system, including the BB, are in progress, albeit still in their infancy. The impact of these changes will become more apparent once a substantial number of reforms have been sustainably implemented over time.

The writer is former lead economist of the World Bank's Dhaka office.​

 

[Saif]

Restructuring banking sector

Bangladesh's economic achievements over the past decades are at risk due to severe financial sector challenges. The banking sector is facing a crisis, with non-performing loans (NPLs) exceeding 30 per cent, capital and liquidity shortages, weak governance, and regulatory inefficiencies. Meanwhile,

thefinancialexpress.com.bd

Restructuring banking sector
M Fazlur Rahman
Published :
Mar 17, 2025 23:03
Updated :
Mar 17, 2025 23:03

Bangladesh's economic achievements over the past decades are at risk due to severe financial sector challenges. The banking sector is facing a crisis, with non-performing loans (NPLs) exceeding 30 per cent, capital and liquidity shortages, weak governance, and regulatory inefficiencies. Meanwhile, the capital market remains underdeveloped, lacking both investor confidence and proper oversight.

Without bold, structured reforms, these systemic weaknesses are likely to lead to financial instability, economic stagnation, rising inflation, and increased business costs. Immediate action is essential to restore banking sector resilience, rebuild capital market trust, and ensure long-term economic sustainability. A comprehensive financial sector restructuring strategy, prioritising national interests over political and vested interests, must align with global best practices.

The banking sector is facing critical challenges that threaten its stability and growth. These challenges include soaring NPLs, averaging over 35 per cent, with some banks exceeding 60 per cent, compared to the global norm of below 10 per cent; capital and liquidity shortages; weak governance and political interference; regulatory inefficiency; technological gaps; corruption and fraud; macroeconomic instability; and rising global pressure to adopt green financing and sustainable practices-all of which require a strategic shift in lending models and alignment with economic goals.

Bangladesh must adopt proven reform models from countries like the USA, India, Japan, South Korea, and Indonesia, which have successfully tackled banking crises through structured transformations.

As the country is failing to manage NPLs with existing tools, we can follow the models of countries like Japan, the USA, India, and South Korea, which have successfully tackled the problem of NPLs.

Other models could also be followed to strengthen governance and reduce political interference, enhance regulatory frameworks, foster digital transformation and cybersecurity, improve financial inclusion and literacy, manage macroeconomic risks, combat corruption and fraud, and promote green financing and ESG compliance.

Bangladesh should categorise banks by specialisation to prevent excessive diversification, such as retail banks that mainly provide consumer-focused services, corporate and SME banks for industrial financing, Islamic banks for Shariah-compliant financial models, digital and fintech banks that provide mobile financial services, and remittance and expatriate banks specifically for serving the NRB community.

The government should buy back NPLs from banks or issue low-interest bonds to absorb bad assets.

Alternatively, the government could issue long-term bonds to the general public and use the proceeds to replace NPLs on bank balance sheets. This would inject liquidity into the system while ensuring public participation in financial stability. In addition, stricter legal penalties should be imposed on willful defaulters and bank loan fraudsters.

To maintain inflation at a stable rate and ensure sustainable economic growth, stricter lending criteria should be enforced. However, lending should also be made available at lower costs to productive sectors to stimulate business growth.

By implementing these measures, Bangladesh can restructure its banking sector, eliminate NPL burdens, ensure liquidity flow, and create a more resilient financial system for steady economic growth.

Institutional reforms in the country's banking sector should include, importantly, strengthening Bangladesh Bank's autonomy, creating specialised agencies, adopting technology to prioritise digital infrastructure and cybersecurity, maintaining global standards by aligning with Basel III, FATF AML guidelines, and ESG frameworks, fostering public-private partnerships, decoupling banking decisions from political influence, and publishing NPL data while involving civil society in oversight to ensure public accountability.

The banking sector is the backbone of Bangladesh's economy, and its restructuring must be driven by national interest, financial discipline, and long-term sustainability. Without immediate reforms, investor confidence will weaken, business costs will rise, and financial instability will persist.

Bangladesh must replicate global successes by strengthening institutions, leveraging technology, and enforcing zero tolerance for corruption. By adopting global best practices and ensuring governance reforms, Bangladesh can build a resilient, liquid, and efficient banking sector, supporting SME growth, industrialisation, and foreign investment.

The time for debate is over-bold, immediate, and structured actions are necessary to secure Bangladesh's financial future.

The writer is a former Managing Director of private commercial bank.​

 

[Saif]

A paradigm shift in banking

The global banking sector is undergoing a significant transformation with the introduction of the International Financial Reporting Standard 9 (IFRS 9), which mandates using the Expected Credit Loss (ECL) framework for credit loss provisioning. This shift from the traditional incurred-loss model to

thefinancialexpress.com.bd

A paradigm shift in banking
IFRS 9 and expected credit-loss provisioning
Md Touhidul Alam Khan
Published :
Mar 17, 2025 22:57
Updated :
Mar 17, 2025 22:57

Customers depositing cash at a bank branch in Dhaka. Photo : FE/Files

The global banking sector is undergoing a significant transformation with the introduction of the International Financial Reporting Standard 9 (IFRS 9), which mandates using the Expected Credit Loss (ECL) framework for credit loss provisioning. This shift from the traditional incurred-loss model to a forward-looking ECL approach represents a fundamental change in how banks recognise and account for credit losses. For Bangladesh's banking sector, this transition, as outlined in Bangladesh Bank's BRPD Circular No. 03, dated January 23, 2025, marks a critical step toward aligning with international best practices and enhancing financial transparency. This article delves .into the key aspects of IFRS 9, the ECL framework, and its implications for the banking sector, particularly in Bangladesh.

THE EVOLUTION FROM INCURRED LOSS TO EXPECTED CREDIT LOSS: For decades, banks worldwide have relied on the incurred-loss model, which recognises credit losses only after they occur. While this approach is straightforward, it has been widely criticised for its reactive nature and inability to account for future risks. The incurred-loss model often results in delayed recognition of credit losses, which can exacerbate financial instability during economic downturns.

IFRS 9, issued by the International Accounting Standards Board (IASB) in July 2014, introduces a more proactive approach through the ECL framework. Under IFRS 9, banks are required to recognize credit losses based on expected future defaults rather than past events. This forward-looking approach considers past events, current conditions, and forecast information, ensuring that credit losses are recognized in a more timely and accurate manner. The ECL framework is designed to mitigate procyclicality and provide a more realistic assessment of credit risk, thereby enhancing the resilience of the banking sector.

THE ECL FRAMEWORK: SCOPE AND APPLICATION: Under IFRS 9, financial assets are classified based on the business model for managing them and their cash flow characteristics. Financial assets such as loans, lease receivables, loan commitments, and financial guarantee contracts are subject to the ECL framework if they meet specific criteria. For simplicity, this article focuses on the application of the ECL framework to loans.

THE ECL FRAMEWORK REQUIRES BANKS TO RECOGNIZE CREDIT LOSSES IN THREE STAGES: Stage 1: When a loan is originated or purchased, banks recognise 12-month ECLs, which represent the expected credit losses resulting from default events that are possible within the next 12 months. A loss allowance is established, and interest revenue is calculated on the loan's gross carrying amount.

Stage 2: If a loan's credit risk increases significantly since its initial recognition, banks recognise lifetime ECLs. The calculation of interest revenue remains the same as in Stage 1.

Stage 3: If a loan becomes credit-impaired, banks recognise lifetime ECLs and interest revenue is calculated based on the loan's amortised cost (gross carrying amount less the loss allowance).

TWELVE-MONTH VS. LIFETIME EXPECTED CREDIT LOSSES:

The ECL framework distinguishes between 12-month ECLs and lifetime ECLs. Twelve-month ECLs represent the portion of lifetime ECLs associated with the possibility of a loan defaulting within the next 12 months. It is not the expected cash shortfalls over the next 12 months but the effect of the entire credit loss on a loan over its lifetime, weighted by the probability that this loss will occur in the next 12 months.

Lifetime ECLs, on the other hand, represent the expected present value of losses that arise if a borrower defaults on its obligation throughout the life of the loan. These losses are calculated as a weighted average of credit losses, with the probability of default serving as the weight. Even if a bank expects to be paid in full but later than the contractual due date, a credit loss is recognized.

DISCLOSURE REQUIREMENTS: IFRS 9 mandates that banks disclose detailed information about their ECL calculations, including the basis for measuring ECLs and assessing changes in credit risk. Banks must also provide a reconciliation of the opening and closing ECL amounts and carrying values of the associated assets, categorized by asset class and type of ECL (12 months or lifetime). These disclosure requirements enhance transparency and enable stakeholders to better understand a bank's credit risk profile.

REGULATORY TREATMENT OF ACCOUNTING PROVISIONS: The timely recognition of credit losses is crucial for promoting safe and sound banking systems. The Basel Committee on Banking Supervision (BCBS) has long recognized the close relationship between capital and provisions. In October 2016, the BCBS released a consultative document and discussion paper on the regulatory treatment of accounting provisions under the Basel capital framework, in light of the shift to ECL by both the IASB and the US Financial Accounting Standards Board.

Given the diversity of accounting and supervisory policies across jurisdictions, the BCBS decided to retain the current regulatory treatment of provisions for an interim period. However, the BCBS has set out optional transitional arrangements for the impact of ECL accounting on regulatory capital and corresponding Pillar 3 disclosure requirements. These arrangements provide flexibility for individual jurisdictions as they transition to the ECL framework.

BANGLADESH'S JOURNEY TOWARD IFRS 9 IMPLEMENTATION: Bangladesh's banking sector is poised to embrace IFRS 9 and the ECL framework by 2027, as outlined in Bangladesh Bank's BRPD Circular No. 03 of this year. This transition represents a significant departure from the traditional rule-based loan classification system and underscores the central bank's commitment to enhancing risk management and financial transparency.

To facilitate a smooth transition, Bangladesh Bank has laid out a detailed roadmap with specific timelines and milestones. Key steps include the formation of IFRS 9 Implementation Teams, the development of comprehensive databases for ECL calculations, and extensive training programs for bank employees. By December 2027, the ECL-based loan classification and provisioning system is expected to be fully operational across the banking sector.

PREPARING FOR SUCCESS: Successful implementation of IFRS 9 requires significant institutional readiness. Banks must review and upgrade their internal systems, accounting standards, and IT infrastructure to meet the demands of the new framework. The IFRS 9 Implementation Team, comprising officials from Credit Risk Management, Financial Accounts, IT, and Internal Control and Compliance (ICC), will play a pivotal role in ensuring compliance and operational efficiency.

To maintain transparency and accountability, banks must submit quarterly progress reports to their Board of Directors (BODs), with summaries shared with the Banking Regulation and Policy Department (BRPD). These reports will provide a clear picture of the implementation status, highlight challenges, and outline corrective actions. Additionally, banks are encouraged to seek technical assistance from external experts to address complex implementation issues and ensure a smooth transition.

A BRIGHTER FUTURE FOR BANKING: The adoption of IFRS 9 and the ECL framework represents a transformative step for Bangladesh's banking sector. By following the structured roadmap and prioritizing capacity building, banks can ensure a seamless transition to the ECL-based provisioning system. This shift will not only strengthen the financial health of banks but also bolster investor confidence and contribute to the overall stability of the economy.

As Bangladesh's banking sector embarks on this journey, it stands poised to emerge as a more resilient, transparent, and globally competitive player in the financial landscape. The road ahead may be challenging, but the rewards-greater stability, transparency, and trust-are well worth the effort.

The introduction of IFRS 9 and the ECL framework marks a new era for the global banking sector, and Bangladesh is no exception. By adopting a forward-looking approach to credit loss provisioning, banks can better manage risks, enhance financial transparency, and build trust among stakeholders. Successful implementation of IFRS 9 will require careful planning, robust systems, and a commitment to capacity building. However, the long-term benefits of a more resilient and transparent banking sector make this transition a critical step toward a brighter financial future.

Dr. Md. Touhidul Alam Khan is an experienced banker and cost & management accountant from the Institute of Cost & Management Accountants of Bangladesh (ICMAB).​

 

[Saif]

Bad loans at scam-hit banks surge after political changeover

Bad loans soared to alarming levels at over a dozen banks that were mired in loan irregularities and major scams under the previous regime, as large businesses with ties to the former government defaulted heavily following the political changeover.

www.thedailystar.net

Bad loans at scam-hit banks surge after political changeover

Bad loans soared to alarming levels at over a dozen banks that were mired in loan irregularities and major scams under the previous regime, as large businesses with ties to the former government defaulted heavily following the political changeover.

At the end of last year, defaulted loans in the banking sector stood at Tk 345,765 crore, with those state-run and private commercial banks holding the majority.

Among them, non-performing loans (NPLs) at state-owned Janata Bank reached a record Tk 67,148 crore by the end of 2024, accounting for 72 percent of its total disbursed loans, according to Bangladesh Bank (BB) data.

Bad loans at Janata Bank increased by 284 percent in just one year -- up from Tk 17,501 crore, or 19.2 percent of its total lending, at the end of 2023.

Once a respected lender, Janata Bank gained notoriety due to a series of scams and loan irregularities involving Anontex, Crescent, Beximco, Thermax and S Alam Group during the previous government's tenure.

Bad loans linked to these five defaulters crossed Tk 45,000 crore.

The bank is now going through a severe liquidity crisis and struggling to carry out regular banking operations.

To ease the cash crunch, it recently sought a Tk 20,000 crore liquidity support from the interim government and the central bank.

Md Mazibur Rahman, managing director of Janata Bank, told The Daily Star last week that since the political changeover in August, the bank's new management has been working to manage loan irregularities.

Legal action is now being taken against defaulters, he added.

At private-sector National Bank, default loans rose by 109 percent year-on-year to Tk 25,846 crore by the end of 2024, making up 61 percent of the total disbursement.

After the interim government took office in August last year, the central bank restructured the boards of 11 banks, including National Bank.

National Bank, the country's first private-sector commercial lender, had a prosperous past. However, it became a loss-making entity due to massive loan irregularities, poor governance and boardroom conflicts.

During the 16-year tenure of the previous Awami League government, business conglomerate Sikder Group dominated the bank. After the political changeover, Abdul Awal Mintoo, a businessman and vice-chairman of the Bangladesh Nationalist Party (BNP), was appointed as the chairman of National Bank.

Default loans at Islami Bank Bangladesh spiralled to Tk 32,817 crore by the end of 2024, up from Tk 6,919 crore a year earlier. The amount accounts for 21 percent of its total lending.

Islami Bank was one of the worst-affected banks due mainly to the controversial business conglomerate S Alam Group, which dominated the board of the largest Shariah-based bank until mid-August last year.

The Chattogram-based conglomerate and its affiliated firms borrowed more than 80 percent of Islami Bank's total Tk 155,659 crore in loans.

Other banks under S Alam Group's influence were First Security Islami Bank, Union Bank, BCB, and Global Islami Bank. These lenders also saw a sharp rise in bad loans last year.

Year-on-year, defaulted loans at First Security Islami Bank surged by Tk 15,710 crore to Tk 17,851 crore. At Union Bank, bad loans rose by Tk 23,992 crore to Tk 24,835 crore, while at BCB, they increased by Tk 224 crore to Tk 1,432 crore.

At Global Islami Bank, defaulted loans climbed by Tk 4,216 crore to Tk 4,442 crore.

Following the political changeover, these banks were freed from S Alam Group's influence after the central bank dissolved their boards and appointed new ones.

Officials at these banks said that a large portion of the loans disbursed to S Alam Group and its associated companies is now in default.

Defaulted loans at AB Bank stood at Tk 8,573 crore at the end of last year, up from Tk 5,272 crore a year earlier. Bad loans at IFIC Bank rose by Tk 14,603 crore to Tk 17,182 crore over the same period.

Salman F Rahman, a close adviser to ousted prime minister Sheikh Hasina, was the chairman of IFIC Bank. After the government's fall, the central bank restructured the board and removed the Rahman-led management.

Officials at the bank told The Daily Star that although Rahman's Beximco Group had only a 6 percent stake, the group exerted significant influence over IFIC and secured around Tk 10,000 crore in loans -- posing a major risk for a bank of its size.

Bad loans at state-run Agrani Bank reached Tk 27,932 crore, or 38.45 percent of its total lending.

The bank ran into trouble due to excessive exposure to a few large borrowers, including Bashundhara Group, Orion Group, Zakia Group, and Joj Bhuyia Group, according to BB documents.

Social Islami Bank, another lender previously controlled by the S Alam Group, saw its bad loans rise to Tk 13,267 crore, or 35 percent of total disbursed loans.

Padma Bank's defaulted loans increased to Tk 4,870 crore, or 87 percent of its total lending. A few years after its launch, the bank was hit by a massive scam and loan irregularities.

ICB Islamic Bank had the highest default loan ratio, with bad loans accounting for 91 percent of its total lending at the end of last year.

Bankers said defaulted loans surged in 2024 as large borrowers defaulted heavily after the Awami League's fall, pushing overall bad loans to an unprecedented level.

Besides, they said the central bank's directive for more transparency had led banks to disclose more accurate figures, including previously concealed bad loans.​

 

[Saif]

10 banks in Bangladesh hold Tk 2.57 lakh crore in default loans

Ten commercial banks in Bangladesh collectively had Tk 2.57 lakh crore in defaulted loans as of December 2024, accounting for nearly 75 per cent of the total non-performing loans in the country’s banking sector.

www.newagebd.net

10 banks in Bangladesh hold Tk 2.57 lakh crore in default loans
Mostafizur Rahman 18 March, 2025, 23:43

Ten commercial banks collectively had Tk 2.57 lakh crore in defaulted loans as of December 2024, accounting for nearly 75 per cent of the total non-performing loans in the country’s banking sector.

The alarming concentration of bad loans underscores vulnerabilities of the financial sector, experts said.

According to Bangladesh Bank data, four state-run banks held Tk 1,26,062 crore in NPLs, while six private commercial banks had Tk 1,31,797 crore in NPLs at the end of December 2024.

The total volume of defaulted loans in the country’s banking sector surged by Tk 2 lakh crore in just one year, reaching Tk 3.45 lakh crore by the end of 2024.

About 20 per cent of the total bank loans amounting to Tk 17.11 lakh crore was classified as non-performing, the highest rate in South Asia.

This sharp rise came after the exposure of a massive amount of toxic loans which were previously concealed through data manipulation during the Awami League regime ousted on August 5, 2024, in a mass uprising, experts said.

Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, told New Age that the staggering volume of defaulted loans was the result of years of accumulated corruption and unchecked irregularities.

He warned that the surging NPLs posed a severe risk to the country’s economy, driving up borrowing costs and eroding banks’ lending capacity.

Mustafizur observed that the Bangladesh Bank had recently taken steps such as bank board restructuring, asset recovery plans and efforts to hold defaulters accountable, but these measures would take time to yield meaningful results.

Among the worst-hit banks, state-run Janata Bank recorded the highest volume of defaulted loans at Tk 67,147 crore, more than 67 per cent of its total outstanding loans.

The bank’s biggest defaulter, Beximco Group, owed Tk 25,000 crore, nearly all of which turned into bad debts.

The other major defaulters include Anontex, S Alam Group, Crescent Group and Thermex Group.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank, said that the banks with high default loans might struggle to function smoothly.

‘These banks must mobilise deposits and recover bad loans instead of relying on the Bangladesh Bank’s liquidity support to survive,’ he said.

He also noted that the central bank’s initiatives would take time to yield results.

‘We need to wait for some time to assess their effectiveness,’ he added.

Islami Bank held the second-highest amount of defaulted loans, standing at Tk 32,816 crore at the end of December.

Previously controlled by controversial S Alam Group, the bank got most of its NPLs from loans issued to entities linked to the group.

State-run Agrani Bank ranked third with Tk 27,931 crore in defaulted loans, accounting for 38.46 per cent of its total outstanding credit.

Sonali Bank and Rupali Bank reported Tk 15,905 crore and Tk 15,079 crore in NPLs respectively, accounting for 18.61 per cent and 31.71 per cent of their loan portfolios.

Several private banks which were previously under the S Alam Group’s influence also reported high levels of NPLs.

Union Bank held Tk 24,833 crore in bad loans, representing 87.98 per cent of its total disbursed credit.

First Security Islami Bank had NPLs of Tk 17,851 crore (29.33 per cent of its total loans), while Social Islami Bank’s bad loans stood at Tk 13,267 crore (34.79 per cent of its total loans).

National Bank and IFIC Bank also reported significant amounts of defaulted loans at Tk 25,846 crore and Tk 17,851 crore, respectively.

Their NPL rates were 60.5 per cent and 38.5 per cent of their total disbursed loans.

According to the Bangladesh Bank data, S Alam Group alone withdrew nearly Tk 2.25 lakh crore from 10 banks, previously were under the group’s direct or indirect control.

The reckless lending and financial irregularities have put depositors at severe risks, with many banks struggling to repay customer funds.

In response to the crisis, the central bank has recently intervened by restructuring the boards of failing banks and appointing new directors.

It has also injected about Tk 30,000 crore into crisis-hit banks, including National Bank, Union Bank, Social Islami Bank and First Security Islami Bank in an effort to stabilise their operations.

Beyond the top 10 defaulters, several other banks also reported high NPLs.

BASIC Bank recorded Tk 8,601 crore in bad loans, followed by AB Bank Tk 8,572 crore, United Commercial Bank Tk 6,848 crore, Padma Bank Tk 4,870 crore, Global Islami Bank Tk 4,442 crore and Al-Arafah Islami Bank Tk 4,794 crore.

In total, the central bank has so far restructured the boards of 14 private commercial banks.

Since the Awami League-led government assumed power in 2009, banks’ NPLs have skyrocketed.

From Tk 22,240 crore in June 2009, defaulted loans soared to Tk 2,11,391 crore by June 2024 — a nearly tenfold increase in 15 years.

Under the leadership of Bangladesh Bank governor Ahsan H Mansur, the true scale of the crisis is being exposed.

For years, banks, borrowers and regulators had colluded with each other to mask the extent of bad loans through loan rescheduling and data manipulation, experts said.​

 

[Saif]

Islamic banks see deposit shift

Islamic wings of conventional banks have become the preferred choice for religiously inclined depositors as many full-fledged Shariah-based banks struggle with a crisis of trust..This shift has emerged after controversies and financial scandals involving Shariah-based banks, many of which

www.thedailystar.net

Islamic banks see deposit shift
Shariah wings of strong banks gain, while full-fledged lenders stumble

Islamic wings of conventional banks have become the preferred choice for religiously inclined depositors as many full-fledged Shariah-based banks struggle with a crisis of trust.

This shift has emerged after controversies and financial scandals involving Shariah-based banks, many of which were controlled by the controversial conglomerate S Alam Group during the previous regime.

Although the boards of these banks were reshuffled after the political changeover in August last year, industry insiders say rebuilding public trust will take time.

At the end of 2024, deposit growth in the banking sector slowed to 7.47 percent. However, 18 banks experienced deposit surges exceeding 26 percent, with some Islamic wings of conventional banks registering increases of more than 100 percent.

A senior central bank official told The Daily Star that certain conventional banks and their Islamic wings successfully drew in large deposits that had been withdrawn from about half a dozen struggling lenders.

As financial irregularities at commercial banks linked to S Alam Group came under scrutiny, savers moved their funds to banks with stronger financial standing and reputations, he added.

In 2024, deposits at National Credit and Commerce (NCC) Bank rose by only 13.04 percent to Tk 25,410 crore. However, deposits in its Islamic wing soared by a record 110 percent, the highest in the banking sector.

"Public confidence in some banks was severely shaken last year, which contributed to our strong deposit growth," said M Shamsul Arefin, managing director of NCC Bank.

He told The Daily Star that as customers of certain Shariah-based banks struggled to withdraw their savings, many sought alternative Shariah-compliant options. This trend significantly benefited the Islamic banking units of conventional banks.

"NCC Bank is financially sound and is expanding its Islamic banking operations to cater to the rising demand for Shariah-based financial services," Arefin added.

Similarly, at the end of last year, Pubali Bank's total deposits stood at Tk 70,637 crore. While the bank recorded a 21 percent deposit growth overall, its Islamic wing saw a 91.18 percent rise.

"Many depositors lost trust in full-fledged Islamic banks, prompting them to turn to the Islamic wings of established conventional banks," said Mohammad Ali, managing director of Pubali Bank.

"Our Shariah compliance is very high, which has helped strengthen confidence in our Islamic banking operations," he added.

Another example is Prime Bank, which saw total deposits grow by 12.74 percent last year while deposits with its Islamic wing ballooned by 61.34 percent.

Along that same vein, the Islamic wing of Mutual Trust Bank saw deposit growth of 66.34 percent and One Bank's Islamic wing recorded a 54 percent increase, according to central bank data.

Hassan O Rashid, managing director of Prime Bank, said that the expansion of Islamic banking deposits in Bangladesh is driven by high demand, supportive policies and unique sectoral features such as risk-sharing, financial inclusivity and asset-backed transactions.

"These attributes align with religious principles and provide financial security," said Rashid.

Prime Bank was the first conventional bank in Bangladesh to introduce Islamic banking, launching such services through five dedicated branches in 1995.

"Our 30 years of expertise in Islamic banking, coupled with Prime Bank's financial strength, digital banking approach, timely deposit offerings and well-trained branch officials, have contributed to this growth," Rashid added.

Jamuna Bank recorded a 26.31 percent overall deposit growth last year, with deposits with its Islamic wing growing by 27.17 percent.

"Full-fledged Shariah-based banks are experiencing a temporary crisis of confidence, leading to the strong deposit growth in Islamic wings within conventional banks," said Mirza Elias Uddin Ahmed, managing director of Jamuna Bank.

He added that profit rates in the Islamic wings of conventional banks tend to be higher than those of Shariah-based banks, which has also contributed to the influx of depositors.

"This strong deposit growth has significantly improved our liquidity position," Ahmed said.

Midland Bank recorded an overall deposit increase of 29.77 percent last year, while its Islamic wing recorded a 33.37 percent deposit growth.

Ahsan-Uz Zaman, managing director and CEO of Midland Bank, told The Daily Star that public trust in the bank is growing because it tailors financial products to client needs.

"People now feel more secure entrusting their savings to Midland Bank, which has contributed to our deposit growth," he said.

Last year, deposit growth in the Islamic banking wings of other banks included Sonali Bank at 34.15 percent, Mercantile Bank at 29.15 percent, SBAC Bank at 28.69 percent, Trust Bank at 35 percent, City Bank at 20.40 percent, Meghna Bank at 72 percent, and UCB at 27 percent, according to central bank data.

In contrast, weak and troubled banks, including several Shariah-based ones, saw deposit declines last year. BASIC Bank, Janata Bank, AB Bank, Bangladesh Commerce Bank, EXIM Bank, First Security Islami Bank, ICB Islamic Bank, National Bank, Padma Bank, and Social Islami Bank all reported negative deposit growth.​

 

[Saif]

Troubled banks seek additional liquidity support

Several financially strained banks have sought additional liquidity support from Bangladesh Bank to meet the surge in cash withdrawals ahead of Eid-ul-Fitr. According to central bank sources, at least six banks have requested Tk 5,000 crore in liquidity assistance to cope with the increased demand

thefinancialexpress.com.bd

Troubled banks seek additional liquidity support
FE Online Desk
Published :
Mar 19, 2025 17:45
Updated :
Mar 19, 2025 17:45

Several financially strained banks have sought additional liquidity support from Bangladesh Bank to meet the surge in cash withdrawals ahead of Eid-ul-Fitr.

According to central bank sources, at least six banks have requested Tk 5,000 crore in liquidity assistance to cope with the increased demand. But the central bank has advised them to borrow from financially stable banks under the Bangladesh Bank guarantee scheme, UNB reports.

Meanwhile, First Security Islami Bank, Global Islami Bank, Social Islami Bank, Union Bank and National Bank have signed agreements with Bangladesh Bank to secure loans under this scheme.

Following the change of government in August 2024, Bangladesh Bank provided Tk 29,000 crore in liquidity support to nine banks.

As per the central bank’s records:

Social Islami Bank (SIBL) received Tk 5,500 crore
First Security Islami Bank received Tk 6,500 crore
National Bank received Tk 5,000 crore
Union Bank received Tk 2,000 crore
Global Islami Bank received Tk 2,000 crore
Exim Bank received Tk 8,500 crore
Bangladesh Commerce Bank received Tk 200 crore
ICB Islami Bank received Tk 100 crore
AB Bank received Tk 200 crore​

 

[Saif]

Depositors to get max Tk 2 lakh on bank liquidation

The Bangladesh Bank (BB) has drafted a Deposit Protection Ordinance, proposing a maximum payout of Tk 2 lakh per depositor if a bank undergoes liquidation. The limit will be reviewed every three years.

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Depositors to get max Tk 2 lakh on bank liquidation
Remaining amount will be settled after liquidation, BB says in draft ordinance

The Bangladesh Bank (BB) has drafted a Deposit Protection Ordinance, proposing a maximum payout of Tk 2 lakh per depositor if a bank undergoes liquidation. The limit will be reviewed every three years.

The draft, now open for public feedback, maps out the establishment of a Deposit Protection Authority within the central bank, which will oversee a separate fund maintained through premiums from financial institutions.

Depositors surpassing the protection limit must claim the excess through the liquidator.

The ordinance also details a seven-day payout window for secured deposits and tax exemptions for the fund's earnings. The central bank may impose penalties on institutions failing to pay premiums on time.

Earlier, central bank Governor Ahsan H Mansur hinted at the introduction of the ordinance to ensure depositor protection.

The ordinance will replace the Bank Deposit Insurance Act-2000, under which the maximum payout is Tk 1 lakh.

According to the draft ordinance, the government will establish a deposit protection system for its implementation, with the BB designated as the Deposit Protection Authority.

"The responsibilities of the authority will be separate and independent from the Bangladesh Bank's regular responsibilities, such as regulatory, supervisory, and resolution-related functions," says the draft.

To ensure the effective exercise of its powers and responsibilities, the central bank will create a separate division within its organisational structure, called the "Deposit Protection Division".

Decisions regarding the deposit protection system will be made by a board of directors comprising seven members, with the BB governor as the chairman.

The board will determine the maximum limit of protected deposits at least once every three years and oversee regulations, by-laws, investment policies, and risk-based premium rates.

It will also allocate funds to support bank resolutions.

Deposit protection fund

Under the ordinance, the central bank will establish a deposit protection fund, maintained through a separate account.

The fund will comprise initial, annual risk-based, and special premiums received from banks; penalties collected from member institutions; profits earned from investments; adjusted funds from liquidated banks; and other unconditional funds designated for payment.

Primarily, the fund will be used to pay secured deposits in the event of a bank's dissolution, though it may also provide financial assistance for bank resolution.

In the case of a fund deficit, the BB will have the authority to collect special premiums from member institutions, seek unconditional financial assistance from the government or other sources, or secure government loans.

Besides, the central bank will establish a separate fund for depositors of non-bank financial institutions.

The draft ordinance says that, regardless of the Income Tax Act, 2023, the Business Profits Act, 1947, or any other existing tax laws, no income tax, surtax, or business profits tax shall be applicable to the income, profits, or receipts of the Deposit Protection Fund.

Moreover, if a member institution fails to pay the prescribed premium within the stipulated timeframe, the BB will deduct the corresponding amount from the institution's current account and deposit it into the relevant account of the Deposit Protection Fund.

The central bank may also impose a penalty on overdue premiums, applying an interest rate equivalent to the higher of Bangladesh Government Treasury Bonds or Treasury Bills.​