[🇧🇩] Banking System in Bangladesh

[Saif]

Empowering central bank with sweeping powers

One of the reasons why the nexus of corrupt politics and its crony oligarchs could get away with plundering the banking sector during the autocracy was the powerlessness of the Bangladesh Bank (BB) to stop it. Obviously, the interim government under the dispensation of post-July uprising realised t

thefinancialexpress.com.bd

Empowering central bank with sweeping powers
Published :
May 14, 2025 00:07
Updated :
May 14, 2025 00:07

One of the reasons why the nexus of corrupt politics and its crony oligarchs could get away with plundering the banking sector during the autocracy was the powerlessness of the Bangladesh Bank (BB) to stop it. Obviously, the interim government under the dispensation of post-July uprising realised the urgency of equipping the BB with the necessary legal tools so it could exercise its authority to rescue the fragile banking sector by way of taking actions against non-compliant/sick banks to protect depositors and borrowers. As chronic fragility of the banking sector has caused significant erosion in the public's as well as the investors' trust in the banking system, the financial institutions division under the finance ministry in February this year published the draft law titled the Bank Resolution Ordinance, 2025 granting the BB sweeping powers to do what was necessary to save the banking sector plagued by various malpractices including scams, poor governance, weak compliance, heists and ever-rising volume of the non-performing loans (NPLs).

The government through a gazette notification on Friday, May 9 last published the ordinance under which a troubled bank could be restructured or liquidated in a way that the process minimizes the failing bank's impact on the depositors, other banks and the broader economy. Undeniably, it is a landmark step by the government towards restoring discipline in the financial, or for that matter in the banking sector. Thus, the Bank Resolution Ordinance is endowed with broad powers to intervene in case any of the banks or financial institutions, state-owned or private, or foreign, found compromised. The BB would then take steps to dissolve a struggling bank appoint temporary administrator, transfer its assets to another state-owned entity, the so-called bridge bank. The bridge bank, on its part, is a special type of bank authorised to take over and operate a failing bank for a limited period of time. In fact, it acts as a bridge allowing time for a potential buyer to be found or explore other resolution options. Also, another function of the bridge bank is to act as an isolator so as to isolate the distressed bank from the broader banking sector to prevent panic withdrawal by depositors.

The whole purpose of a bridge bank, therefore, is that the clients of a struggling bank can continue to access, for instance, their deposits or get other financial services seamlessly. Now, the BB will also be able to raise capital through new or existing shareholders to strengthen financial position of a distressed bank. Evidently, a fund, styled, 'Bank Restructuring and Resolution Fund' will be created through government contributions, international financial institutions, risk-based levies on banks and so on. However, in case, the struggling bank fails to meet capital or liquidity requirements or its owners engage in fraudulent practice, the BB will have the power to take corrective measures as necessary.

Now, as designed, the BB has its powers to clean up the mess in the banking sector created over the decades, especially during past one and a half decades of autocracy. But it is one thing to have power, quite another to exercise it. The question arises because, the country had never any dearth of laws. But what it was wanting in was their execution. Hopefully, this time the banking sector regulator will show its teeth, if and when needed.​

 

[Saif]

Cenbank governor says market to set dollar rate

Bangladesh will allow the market to determine the dollar exchange rate, the central bank said on Wednesday. "I hope the new rate will remain around the current level," Bangladesh Bank Governor Ahsan H Mansur told reporters via video link from Dubai during a press briefing organised by the central

thefinancialexpress.com.bd

Cenbank governor says market to set dollar rate
FE ONLINE DESK
Published :
May 14, 2025 16:39
Updated :
May 14, 2025 16:39

Bangladesh Bank Governor Dr Ahsan H Mansur -- File Photo

Bangladesh will allow the market to determine the dollar exchange rate, the central bank said on Wednesday.

"I hope the new rate will remain around the current level," Bangladesh Bank Governor Ahsan H Mansur told reporters via video link from Dubai during a press briefing organised by the central bank.

The move follows months of negotiations with the IMF, which had pushed for a market-based exchange rate as a condition for disbursing loan instalments under a $4.7 billion support programme agreed last year.

The IMF had held back loan tranches over concerns about exchange rate controls.

On Tuesday, Bangladeshi authorities agreed to liberalise the system, prompting the global lender to approve the release of two pending instalments, central bank officials said.

Speaking at the briefing, Mansur said the country expects to receive the delayed fourth and fifth tranches of the IMF loan by June.​

 

[Saif]

Data-driven lending solution for Bangladeshi banks

The process of securing a loan from most banks and non-bank financial institutions (NBFIs) feels like a maze.

www.thedailystar.net

Data-driven lending solution for Bangladeshi banks

File photo: REUTERS

In Bangladesh, the process of securing a loan from most banks and non-bank financial institutions (NBFIs) feels like a maze. A small business owner walks in with a mountain of paperwork, a salaried professional submits their home loan application with fingers crossed, and a credit officer begins the tedious task of checking documents and preparing loan appraisal reports. This cycle plays out day after day, with loan decisions made based on outdated risk management practices. Weeks, even months, pass, only for many of these hopeful applicants to face rejection, not because they lack potential, but because the system never truly understood their financial story.

This situation is the silent crisis of our banking system. In a country where the middle class is expanding and millions of small businesses drive the economy, the financial system still struggles to meet their needs. Why? Because credit risk management has not evolved with the times. But there is a solution, and it lies in reimagining the way we assess risk through the lens of data.

Bangladesh is a country of 170 million people. One in four now belongs to the middle class, and that number is growing thanks to rapid urbanisation and digital adoption. This upward shift is opening up big opportunities, especially in retail banking.

Meanwhile, around 10 million CMSMEs (cottage, micro, small, and medium enterprises) comprise 90 percent of industrial units and account for 80 percent of industrial employment. Despite their vital significance, access to finance remains limited simply because they don't have formal documentation, collateral, or traditional credit histories.

This is not a capacity problem. It is a visibility problem. And that is where data-based risk management can change everything.

Data-driven credit analytics offers a powerful alternative to the old way of credit risk management. Instead of relying on a rigid set of forms and a credit officer's intuition, financial institutions can use machine learning, an algorithm trained on years of data from past borrowers, to evaluate the creditworthiness of a potential borrower. This model does not just look at income or collateral; it captures patterns in mobile transaction records, utility bill payments, digital wallet activity, geo-location data and other alternative indicators to assess how a borrower earns, spends, and saves. For CMSMEs, it means analysing business turnover, supplier relationships, cash flow position, and other relevant data points. Within minutes, a machine learning model assigns a credit score rooted in actual outcomes, not outdated assumptions.

The need for smarter risk assessment has never been more urgent. As of December 2024, non-performing loans (NPLs) in Bangladesh reached an all-time high of 20.2 percent of total outstanding loans. The banking sector remains fixated on a small number of large classified loans while overlooking thousands of creditworthy individuals and small businesses. As Bangladesh aims to rebuild its banking system, leveraging data analytics is pivotal for its banking sector to remain competitive and resilient.

One of the greatest advantages of data-driven risk management appears in the post-disbursement phase. In a traditional risk management approach, financial institutions only learn about borrower distress after it is too late, when a payment is missed or a default occurs. By then, recovery becomes costly and complicated. On the contrary, real-time data analytics allows for proactive monitoring. If a borrower's transaction volume drops or their repayment behaviour changes, analytics systems can flag the risk immediately. Financial institutions can step in early with a reminder and the right recovery plan.

Historically, banks and NBFIs avoided small loans because of the high cost of customer acquisition and supervision. But digital technology is flipping that logic on its head. With the right data infrastructure, financial institutions can automate most of the credit lifecycle: from application to approval to monitoring. This reduces operating costs and makes small-ticket retail and SME lending not just viable, but profitable.

Beyond traditional financial product offerings, data analytics is also opening doors to embedded finance, a model where credit is offered directly through platforms people already use. Think of a ride-hailing driver getting a loan from the app they work for. Or an online seller receiving instant credit based on their digital sales history. According to a report published by ResearchAndMarkets.com, embedded finance is projected to grow at a 48 percent annual rate from 2024 to 2029, with revenues expected to hit $5.8 billion. However, to tap into this opportunity, financial institutions need to shift from product-based offerings to ecosystem-based thinking. That means building APIs, investing in cloud-based infrastructure, and most importantly, using data as the foundation of all credit decisions.

The good news is that the transition to data-based risk management doesn't require a complete overhaul. Most banks already have years of valuable data sitting in their systems. Building a scorecard model using that data to predict default risk is both doable and cost-effective. Integrating modern loan origination systems (LOS) with existing core banking platforms is a proven path. What is needed now is a mindset shift: from fearing risk to understanding it, from gatekeeping to enabling and from guesswork to insight.

Several forward-thinking banks and NBFIs in Bangladesh have already taken this step. By integrating a robust LOS with their legacy core banking platforms, they have successfully adopted data-driven risk management systems. These institutions are thriving, benefiting from faster loan processing, more accurate credit assessments, and reduced default rates.

Imagine a Bangladesh where a woman running a home-based clothing business can get a small loan based on her online sales, where a local grocer in Bogura is evaluated not by collateral but by years of consistent supplier payments and sales turnover, and where a ready-made garment worker can access an affordable home loan to construct a semi-pucca building on the outskirts of Dhaka, in Savar. That future is not far off. It is waiting at the edge of data and the financial institutions willing to harness it.

Financial institutions that lead this shift will not only find new markets and revenue streams. Surely, they'll build something far more valuable: trust, inclusion, and long-term resilience. The future of credit risk management is not about rejecting loans. It is about knowing who to trust and letting data tell the story.

Shah Jalal is a risk management professional working at a non-bank financial institution.​

 

[Saif]

A clean slate for BD's banks?

The numbers are ugly. Bangladesh's non-performing loans (NPLs) have exploded to over Tk 3.45 trillion by the end of 2024. When you include restructured and written-off loans, the bad asset mountain rises to a staggering Tk 4.75 trillion-about a third of all outstanding loans. That's not just bad. I

thefinancialexpress.com.bd

A clean slate for BD's banks?
Seyed Mosayeb Alam

Published :
May 22, 2025 00:01
Updated :
May 22, 2025 00:01

The numbers are ugly. Bangladesh's non-performing loans (NPLs) have exploded to over Tk 3.45 trillion by the end of 2024. When you include restructured and written-off loans, the bad asset mountain rises to a staggering Tk 4.75 trillion-about a third of all outstanding loans. That's not just bad. It's catastrophic. The banks are choked. The economy is stalled. And trust? It's on life support.

So here comes the cavalry: a government-backed Special Purpose Vehicle (SPV)-a "bad bank" of sorts. Think of it like a janitor for the banking system, sweeping up toxic corporate loans so the banks can breathe again. But this isn't just about cleaning up a mess. It's about rewriting the rules of the game, once and for all.

Let's break down why this bad bank could be the game-changer we need-and what needs to go right.

A Smart, Surgical Strike on Big Loans. This isn't a blanket bailout. The bad bank will target large corporate loans, the ones dragging multiple banks down with them. We're talking exposures above Tk 100 crore-loans that were "evergreened" or rescheduled so many times they've become zombie assets. These are the big fish that jam the gears of the banking machine. By taking them off the books, banks can finally start lending again. SMEs and manufacturers, long deprived of credit, might finally get a break.

Built for Recovery, Not Rescue. The bad bank isn't just a dumping ground. It's designed to recover value. Loans will be bought at steep discounts, not face value. Banks will get a small cash payment upfront-say 15per cent -and the rest as security receipts. They only cash out if the bad bank recovers the loan. That means everyone has skin in the game. No free lunch. No moral hazard. Just focused, performance-driven resolution.

Governance With Teeth (If We Dare to Bite). The biggest risk? Politics. Elite borrowers, connected insiders, and rent-seekers have feasted on our banks for decades. If the bad bank becomes just another toy in their arsenal, we're done. That's why its board must be independent, its mandate legally protected, and its operations transparent. Borrowers who defaulted deliberately should be barred from buying back their assets at discounts. That trick worked in India under the amended Insolvency and Bankruptcy Code-and it should work here too.

Real Economic Uplift, Not Just Optics. The bad bank isn't just a fiscal maneuver. It's an economic stimulus in disguise. By freeing up bank capital, credit-to-GDP could rise from 45per cent to 50 per cent, according to simulations. That's no small feat. A one-point rise in credit-to-GDP can lift investment by 0.7 per cent. That means factories restarting, SME financing doubling, and sectors like construction and manufacturing bouncing back. For an economy desperate to grow, this is rocket fuel.

Of course, the road ahead is littered with landmines. Let's not kid ourselves. If the bad bank overpays for junk loans, we're handing a quiet bailout to the same banks that let this happen. If politicians interfere in recoveries, the whole thing collapses. And if defaulters are allowed to return through the backdoor, we might as well close shop and call it a day.

But here's the twist: we don't need to invent anything new. We just need to take inspiration from what's worked. Malaysia's Danaharta. Ireland's NAMA. India's NARCL. All of them used structure, pricing discipline, and legal power to recover billions. Bangladesh can do the same-if we have the political will.

Let's not forget: this bad bank isn't forever. It should have a sunset clause. A clear timeline. A mission that ends. That keeps it lean, focused, and honest. No bloated bureaucracy. No second coming of Biman-style state inefficiency.

And when the cleanup is done? Then comes Act II. We must fix the root causes: better governance, tighter regulation, stronger loan classification rules, and early warning systems. Otherwise, this whole effort will just buy time for the next disaster.

So, is this our last shot?

Possibly.

If done right, this bad bank could mark the start of a financial renaissance. If done wrong, it'll be just another headline in the long obituary of Bangladesh's banking sector.

Let's choose wisely.​

 

[Saif]

Banks snapping up windfall from gaping interest spread

Banks are bagging a windfall from gaping spread between lending and deposit interest rates that banking experts dub a violation of relevant guidelines and international best practices. On an ascent in a pickup from a descent two years back, the interest-rate spread for banks recorded a significa

thefinancialexpress.com.bd

Banks snapping up windfall from gaping interest spread
Spread between lending, deposit rates rose to 5.87pc in March on an ascent from a descent

Jasim Uddin Haroon
Published :
May 24, 2025 00:53
Updated :
May 24, 2025 00:53

Banks are bagging a windfall from gaping spread between lending and deposit interest rates that banking experts dub a violation of relevant guidelines and international best practices.

On an ascent in a pickup from a descent two years back, the interest-rate spread for banks recorded a significant rise in March 2025, indicating a potential rise in their profitability.

The spread between the weighted average interest rate (WAIR) on advances and deposits for all banks increased by seven basis points to 5.87 per cent in March, compared to the previous month. This level was last seen in October 2024, according to Bangladesh Bank data.

In contrast, nonbank financial institutions (NBFIs) saw a reversal of their fortunes as their spread shrank.

The spread between the WAIR on advances and deposits for NBFIs fell by three basis points to 3.18 per cent in March.

Both banks and nonbanks experienced a rise in their average deposit rates during the month, in a rebound. The WAIR on deposits rose to 6.17 per cent for banks and 10.61 per cent for NBFIs in March last.

Similarly, the WAIR for both banks and NBFIs on advances also increased. For banks, it climbed to 12.04 percent, for NBFIs, it reached 13.79 per cent that month.

In the meantime, the spread between WAIR on advances and deposits for SMEs and large industries increased 6.26 per cent and 6.24 per cent respectively, while in agriculture and services decreased to 5.66 per cent and 6.60 per cent in March compared to the previous month.

"It is unusual. It is too much. The high gap shows that banks are ultimately benefiting," says Shah Md Ahsan Habib, a professor at the Bangladesh Institute of Bank Management (BIBM).

He notes that borrowers are the losers in a high-interest regime, while depositors appear to benefit.

"But, even depositors are not gaining as much as expected under the current high-interest environment. Banks are making more money," the banking professor and researcher told the FE.

Mr. Habib notes that ideally, the interest-rate spread should range between 3.0 and 4.0 per cent-at the most, 5.0 per cent.

He stresses that well-performing banks, in particular, should maintain a lower spread.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank PLC, a privately-owned commercial bank, echoes the observations.

He says the wide spread between deposit and lending rates suggests higher income for financial institutions.

However, he says not all of this income translates into profitability.

"Many banks are required to make substantial provisioning for their rising non-performing loans (NPLs)," he points out.

Mr. Rahman cites that as many as 19 banks failed to distribute dividends last year, despite enjoying a favourable spread.

The senior banker mentions that some banks have raised interest rates on fixed deposits-offering up to 11.5 per cent for three-month tenures-to attract funds as they need the money.

"In the current environment, savers are increasingly looking for financially sound banks to park their money," says Mr. Rahman.

He also notes that a growing number of individuals are investing in government treasury bonds to benefit from high interest while avoiding risk.

On the other hand, economists warn that a high spread can hurt both depositors and borrowers.

Dr. Monzur Hossain, a member of the General Economics Division, feels that in developing countries like Bangladesh, the spread should ideally not exceed 5.0 per cent.

"The optimal range would be 4.0 to 4.5 per cent, in line with international best practices," he says.

He mentions that a wider spread indicates inefficiencies in the financial sector.

"It shows that banks are relying heavily on interest income. A rational and efficient spread should be maintained," Hossain says.

The spread, which dropped to 2.93 per cent in June 2023, went on the ascent again after July 2023, when the Bangladesh Bank removed the 9.0-percent lending-rate cap and introduced the Six-Month Moving Average Rate of Treasury Bills (SMART) as a new benchmark for pricing loans.​

 

[Saif]

BB closely monitoring activities of reconstituted bank boards

Bangladesh Bank (BB) Governor Ahsan H Mansur on Thursday said the central bank is closely monitoring the activities of reconstituted bank boards and will intervene if necessary. He warned that unless stricter classification rules are introduced, non-performing loans (NPLs) could rise to 30 per cen

thefinancialexpress.com.bd

BB closely monitoring activities of reconstituted bank boards
FE REPORT
Published :
May 23, 2025 10:52
Updated :
May 23, 2025 10:52

Bangladesh Bank (BB) Governor Ahsan H Mansur on Thursday said the central bank is closely monitoring the activities of reconstituted bank boards and will intervene if necessary.

He warned that unless stricter classification rules are introduced, non-performing loans (NPLs) could rise to 30 per cent.

"We are going to change the classification rules and make them stricter," he said, adding that the central bank is planning fundamental reforms to the Bank Company Act.

Speaking at the 22nd Nurul Matin Memorial Lecture on Ethics in Banking, the governor said, "We are trying to introduce a provision that limits the number of board members from a single family to two and limiting their tenure as well."

The annual event was organised by the Bangladesh Institute of Bank Management (BIBM) on its campus.

Mr Mansur acknowledged that political support will be essential to implement the necessary banking sector reforms.

He criticised the previous regime for fostering a culture of unethical practices, which left the sector in poor shape. "We are trying to correct those wrongs," he said.

He also noted that restructuring weak banks would be a major challenge.

"Some may go into liquidation, and others may need to be merged," the governor said, adding that the central bank is considering appointing foreign experts to facilitate the process.

M Kabir Hassan, a finance professor in the Department of Economics and Finance at the University of New Orleans in the US, delivered the keynote lecture titled "Roots and Repercussions: Unravelling the Ethical Crisis in Bangladesh's Banking Sector."

He identified political interference, collusion, corruption, and weak governance as the key drivers of financial instability in Bangladesh's banking sector.

The professor cited major banking scandals - such as those involving BASIC Bank, Farmers Bank, Sonali Bank, and Islami Bank Bangladesh - to highlight unethical practices like politically influenced loan approvals, wilful defaults, and regulatory negligence.

"These failures have eroded public trust, destabilised the economy, and disproportionately affected small businesses and rural borrowers," he said.

He underscored the need for stronger penalties, independent anti-corruption watchdogs, and enhanced whistleblower protections to address the crisis.

Besides, the professor warned that the consequences of the banking sector's ethical failures include economic instability, reduced foreign investment, rising unemployment, inflationary pressure, and diminished public confidence.

BB Deputy Governor Nurun Nahar and BIBM Director General Dr Md Akhtaruzzaman also spoke at the event.​

 

[Saif]

Karmasangsthan Bank’s business development meeting held in Rangpur

Business Development Meeting-2025 was held on Friday at Begum Rokeya Auditorium, RDRS, Rangpur, with the participation of Regional Managers, Branch Managers and Second Officers of Rangpur and Dinajpur regions and Regional Managers, Branch Managers and Field Officers of Kurigram region of Karmasangs

thefinancialexpress.com.bd

Karmasangsthan Bank’s business development meeting held in Rangpur
FE ONLINE DESK
Published :
May 23, 2025 21:04
Updated :
May 23, 2025 21:04

Business Development Meeting-2025 was held on Friday at Begum Rokeya Auditorium, RDRS, Rangpur, with the participation of Regional Managers, Branch Managers and Second Officers of Rangpur and Dinajpur regions and Regional Managers, Branch Managers and Field Officers of Kurigram region of Karmasangsthan Bank.

Former Secretary and Chairman of the Board of Directors of Karmasangsthan Bank Dr. AFM Matiur Rahman attended as chief guest in the meeting. Managing Director Arun Kumar Chowdhury, General Manager of Audit Department of the Head Office Md. Amirul Islam were present as special guests, according to a press release.

The meeting was also attended by the DGM of Loan and Advance Department of the Karmasangsthan Bank Head Office Md. Moshiur Rahman, DGM of Loan Recovery Department, Md. Akhter Hossain Pradhan, and the DGM of the Branch Control Department, Monoj Roy. The meeting was presided over by the DGM of Rajshahi Divisional Office, Md. Mukhlesur Rahman.

In his speech, the Chief Guest advised everyone to distribute quality loans through proper customer selection. He also called on everyone to strive to achieve 100 per cent of the business targets in the remaining period of the fiscal year. He also advised everyone to work with honesty and integrity.

In his speech, the Managing Director emphasized on achieving 100 per cent loan disbursement and loan recovery as well as achieving the target of recovery rate against recoverable loans including defaulted loans, classified loans. Stating that the working days in the current fiscal year are very short, he advised to fill the deficit in all indicators through hard work in these few days.​

 

[Saif]

Reviving Bangladesh’s banking sector: A race against time for innovation and reform

Modern, reliable, technologically advanced banks might be the engines for Bangladesh's next development boom.

www.thedailystar.net

Reviving Bangladesh’s banking sector: A race against time for innovation and reform

FILE VISUAL: SHAIKH SULTANA JAHAN BADHON

Once a foundation of economic development, Bangladesh's banking industry is on the verge of becoming its Achilles heel. Crushing non-performing loans (NPLs), poor governance, and stagnant innovation undermine confidence, limit credit expansion, and threaten financial stability. If dramatic changes are not sought, the country may lose one of its main tools for maintaining long-term economic development.

Per the Bangladesh Bank data, NPLs constituted 20.20 percent of all outstanding loans by the end of 2024—well over the safe level of five percent, as advised by the International Monetary Fund (IMF). By June this year, the ratio is likely to rise to 30 percent, the central bank says. Although they own less than 30 percent of the banking assets, state-owned commercial banks are responsible for more than 45 percent of problematic loans. Unresolved vulnerabilities might reduce Bangladesh's GDP growth, compromising its aim for upper-middle-income status, according to the 2025 report of the World Bank.

Still, this approaching disaster is not unavoidable. It results from choices; better choices are still within reach if they are based on innovation and effective governance.

Bangladesh's banking system has historically depended on politically driven credit distribution and branch-based business lending. This model has now reached its limits. Less than 25 percent of Bangladeshi adults now have official credit access (The World Bank's Global Findex Database, 2021). As of December 2024, nearly 24 crore mobile financial service (MFS) accounts run outside the official banking network, according to the Bangladesh Bank.

The private sector, particularly SMEs, is hungry for reasonably priced capital. Stunting business and job growth, a 2023 IFC estimation projects a $2.8 billion MSME finance shortfall in Bangladesh. Simultaneously, poor loan allocation to large but high-risk borrowers is ballooning NPLs and severely damaging the banks' balance sheets. Following business as usual in this environment is useless and harmful.

While Bangladesh's financial administration deteriorated, a worldwide technology revolution was underway. At an unprecedented pace, mobile banking, AI-driven lending, blockchain trade finance, and open banking ecosystems are transforming financial institutions.

Between 2018 and 2022, branchless banking projects provided financial access to 60 million additional clients in Indonesia (World Bank, 2023). Mobile-first microloans under M-PESA expanded SME lending by 24 percent in Kenya over four years (GSMA, 2022). Bangladesh lags in this regard, despite the GSMA's projection (2022) of 63 percent smartphone penetration by 2025. Should banks neglect to adapt, they risk becoming irrelevant to the next generation of companies and customers. The danger is not theoretical; fintech sites already help millions of people who now find conventional banks sluggish, expensive, and inaccessible. Technology should help digitise current services and allow new goods to fit the changing market.

Three factors stand out as interesting:

* Microloans coupled with mobile wallets serve the informal and low-income sectors now left out of official financing.

* Supply chain financing helps SMEs, especially in the RMG and agricultural sectors, by unlocking liquidity for manufacturers and exporters.

* Green finance products encourage the acceptance of renewable energy sources, whereby worldwide investors are progressively channelling funds.

Banks that entered digital microcredit, embedded finance, and green lending enjoyed double-digit asset growth and decreased default rates globally (McKinsey Banking Review, 2023). The first banks to aggressively enter these products might restore Bangladesh's importance and profitability.

Still, without a hard reset in governance, technology and goods alone cannot save the industry.

The banking industry in Bangladesh is defined by weak risk controls, politicalised board nominations, and regulatory forbearance. These elements undermine depositors' trust, conceal big defaulters, and drive bad credit choices.

The reform package presented by the World Bank provides an unambiguous guide:

* Bank resolution frameworks should be improved.

* Stiffer deposit protection should be enforced.

* Expert, non-political board appointments should be specified.

* Specialist asset management companies (AMCs) should be launched to clean up NPLs methodically.

* Bankruptcy rules should be updated to hasten healing.

Vietnam provides a clear lesson: It reduced its NPL levels within five years after robust banking reforms in 2011 and revived private sector credit growth. Bangladesh has to be similarly politically courageous. Without governance improvement, no amount of digital innovation can reestablish public confidence—the lifeblood of banking.

Policymakers must build a regulatory climate that speeds up financial innovation beyond their own reform. It could include:

* Open banking in 24 months: letting clients safely communicate financial data encourages innovation and competitiveness.

* Starting a national fintech sandbox: allowing deliberate exploration driven by controlled testing of new digital items.

Bangladeshi banks now spend less than 0.1 percent of their revenue on cybersecurity, exposing systematic vulnerabilities (Deloitte, 2023). Early adopters of these models, like Singapore, India, and the UK, now find better, more inclusive banking environments. Bangladesh must act now or risk always falling behind its neighbours. Inaction comes at a very high cost. Every year of delay risks compounding NPLs, reducing SME access to capital, and increasing economic marginalisation. The societal fallout from lost employment, failed enterprises, and dashed hopes will eventually overwhelm the obvious financial issues of today.

Still, the benefits of action are great. Modern, reliable, technologically advanced banks might be the engines for Bangladesh's next development boom, fuelling investment, increasing inclusivity, and enabling entrepreneurship. The route chart is straightforward. The technology is available here. The institutional changes have had results. Only political will now separates Bangladesh's banking sector from renewal or irreversible decline. The time for hesitation is over.

Mamun Rashid, an economic analyst, is chairman at Financial Excellence Ltd and founding managing partner of PwC Bangladesh. He has served in senior roles at three global banks: ANZ, Standard Chartered, and Citibank, N.A.​

 

[Saif]

Legal amendments ready for BB autonomy: Governor

Necessary legal amendments are soon for central bank's autonomy and also for downsizing commercial banks' directorships under sweeping reforms that also envisage nationalisation of incurably ailing banks. Bangladesh Bank Governor Dr Ahsan H. Mansur unveils this plan of action in an exclusi

thefinancialexpress.com.bd

Six ailing banks destined for nationalisation
Legal amendments ready for BB autonomy: Governor
Number of directors, family directors to be curtailed, with shorter tenures

JUBAIR HASAN
Published :
May 27, 2025 00:51
Updated :
May 27, 2025 00:51

Necessary legal amendments are soon for central bank's autonomy and also for downsizing commercial banks' directorships under sweeping reforms that also envisage nationalisation of incurably ailing banks.

Bangladesh Bank Governor Dr Ahsan H. Mansur unveils this plan of action in an exclusive interview with The Financial Express (FE), dwelling at length on other far-reaching recast of the country's banking sector.

He said the central bank will start the process of nationalising six ailing commercial banks from July-August next under provisions of the recently introduced Bank Resolution Ordinance.

As part of the revival of the severely liquidity-crisis-ridden commercial lenders, the BB has already done asset-quality review and preview of different scenarios regarding the matching of the banks before official launch of the process of mergers and acquisitions of the problem banks.

Riding on direct cash-support by the banking regulator under the current interim government, the BB governor said, Islami Bank Bangladesh and United Commercial Bank have started rebounding well despite a significant portion of their balance sheets having been emptied through money laundering.

"I must give credit to the current management and their clients who did not lose their trust on the banks and returns. These two banks have come out of the problem and starts operating without any further support from the central bank after the initial feeding," he adds.

But liquidity crisis in most of the remaining banks is severe. There are banks where 87 per cent of the assets have been taken away during the Sheikh Hasina regime.

"How it is possible to do 100-percent servicing with 13-percent assets. No calculation will match it," Mr. Mansur, who took charge of the central bank leadership soon after the July-August mass uprising that toppled the Hasina government in 2024, says about the arithmetic of the banking mismatches.

To solve the problem and ensure full protection of the depositors in these banks, he noted, the regulator will come to intervene and nationalise them under the recently introduced Bank Resolution Ordinance which gives the central bank enough authority to place the incurable banks under state ownership as an ultimate cure.

Responding to a question, the central bank governor said they would start to apply the ordinance from July-August next on the green signal from the reigning interim government.

"We'll move forward for merger-acquisition or recapitalisation. But there is nothing to be worried. The banks will be revitalised through nationalisation to give further relief to the depositors."

He mentions that the Shariah-based banks, apart from Islami Bank Bangladesh, will be merged to form two large Islamic banks as part of sweeping reforms in the financial sector and they will bring potential investors as well.

When his attention was drawn to the unfruitful merger and acquisition moves taken by immediate-past governor Abdur Rouf Talukder under the Awami League regime, the governor said it was a miss-managed effort. There was no legal basis and power of the regulator to do so.

During that time, he recounts, the central bank used to fix who will merge with whom without doing proper asset review. "But we have completed asset-quality review of the banks. We know the value of the assets. We also make various scenario developments of the matching."

On the other hand, they have hired leading global consulting firms having enough experience of mergers and acquisitions and they will guide the regulator in structured way to do the critical tasks.

At the same time, the BB governor says, they are going to bring about major changes in the existing Bank Company Act as part of the ongoing reforms to ensure good governance in the financial sector.

The number of directors will be reduced. Family directorship in the banks will be curtailed to two in place of five and their tenure will be three years in each of two terms.

Now a family director can stay on the bank board twelve years in a row, according to the latest Bank Company Act amended in 2023.

"And 50 per cent of the directors must be independent and independent directors will be chosen from the BB's panel. You cannot appoint anyone you want," he further explains the recast plans.

However, if someone wants to nominate somebody from outside the panel and the nominated person is qualified and respectable, the central bank will approve it.

They will place the draft of the proposed amendment to the Bank Company Act to the chief adviser in July for securing the go-ahead.

Regarding independent functioning of the banking-regulatory body, Mr Mansur says they want to ensure autonomy of the central bank. As part of it, they will go for necessary revision of the Bangladesh Bank Order 1972.

He made it clear that every central bank of the world faces political pressure. Because of the fact, each developed country has put enough safeguards in place to overcome such external pressure.

"I can boldly say there is no external pressure on me. But those who will come later may face external pressure once the political government takes charge. Keeping this in mind, we want to bring reforms in the BB Order so that we can prevent the political pressure as an institution."

"We want to incorporate international best practices into the law and the draft is almost ready. It will also be discussed with the chief adviser in July", he said

Regarding the challenges of leaving the exchange rate to the market, the BB boss said many people feared the exchange rate would reach Tk 150 per dollar in the free-float regime but it didn't.

The central bank recently moved towards the market-centric regime and the exchange rate remained stable and hopefully it would remain so.

If anyone wants to destabilise the foreign-exchange market, the governor warns, they will be dealt with strictly. "There is enough supply of forex in the market thanks to a record inflow of remittance and steady export growth. Let the market go by its own force."

About the role of aggregators, he says they have to take the risk of leaving the exchange rate to be determined by the market. "The aggregators can quote any price they want but I won't buy. How many days they can hold dollars…maximum five working days. Because they will need taka to buy dollars, and for this, they will have to sell dollars."

There is no such vulnerability in the economy that will be able to pay external payments for seven days, even for a month. "Don't hope for gaining big margin like Tk 5 and Tk 10 a dollar. That will not happen," he tells possible dollar hoarders.

About central bank intervention in combating possible exchange-rate distortion, the governor says they kept an intervention fund of $500 million under the IMF lending programme and they don't want to use a single penny from the fund.

"The fund is like a sword and shield for us. I am ready to fight, but I don't want any war. I want peace. Don't force me to do so," he alerts.

Regarding inflation control, the governor felt that exchange-rate stabilisation is very vital in terms of cooling down inflationary pressure. The inflation keeps falling in recent months although it has not been brought down to the target yet.

"Our target is to bring down within 8.0 per cent by June next and below 7.0 per cent by August. I think we are in right direction," the BB governor maintains.​

 

[Saif]

OFC as a strategic monetary policy tool

Bangladesh, which is close to important south and southeast Asian markets, is a potential location for setting up a an Offshore Financial/Business Centre (OFC/OBC). With the interim government announcing a plan to establish a Free Trade Zone (FTZ) and attract global investment, the country is poise

thefinancialexpress.com.bd

OFC as a strategic monetary policy tool
Is it feasible in Bangladesh?

Md Saidul Islam
Published :
May 25, 2025 23:59
Updated :
May 26, 2025 00:09

Bangladesh, which is close to important south and southeast Asian markets, is a potential location for setting up a an Offshore Financial/Business Centre (OFC/OBC). With the interim government announcing a plan to establish a Free Trade Zone (FTZ) and attract global investment, the country is poised for an important shift in its financial landscape. Examining the feasibility of setting up an OFC/OBC in Bangladesh is necessary in this connection. The use of it as a monetary policy tool as well as economic facilitator may also be examined.

In the April 2025 Investment Summit, DP World Chairman expressed interest in investing the country after meeting with Chief Advisor Prof Muhammad Yunus. It offered Bangladesh’s FTZ plan a promising boost. In line with successful models like the Jebel Ali Free Zone in the United Arab Emirates (UAE), a national committee has been established, signifying progress towards a globally interconnected offshore financial centre.

With the OBU Act-2024, facilitated by FF Circular 11 (January 30, 2025) of Bangladesh Bank, the country has made a major institutional shift by enacting its first law to regulate offshore banking after 38 years despite the fact that it is a commercial bank’s banking unit or desk. Investor confidence is, however, dependent on more comprehensive system-wide reforms, such as the setting up OFCs or OBCs.

OFC decoded: The term ‘offshore’ refers to a geographical location outside of one’s home country. It is mostly used in the banking and financial sectors to describe ‘areas where regulations are different from the home country.’ It, however, means that an ‘offshore jurisdiction’ of ‘offshore centre’ may be located within a country although regulated differently.

Generally, the term ‘offshore financial centre’ of OFC is used for any country or a jurisdiction with financial centres comprising of financial institutions that deal primarily with non-residents and/or in foreign currency on a scale out of proportion to the size of the host economy. In other words, non-resident owned or controlled institutions play a vital role within such financial centres. The International Monetary Fund (IMF) in 2007, offered a definition of OFCs: “An OFC is a country or jurisdiction that provides financial services to non-residents on a scale that is incommensurate with the size and financing of its domestic economy.” Despite some limitations, the IMF definition is widely accepted across the world.

Globally, OFCs such as the Cayman Islands, Singapore, Hong Kong, Malaysia, Mauritius and Luxembourg are important in determining economic and financial outcomes by virtue of their ability to facilitate capital flows, enhance currency liquidity, and provide alternative financing windows. The significance of such viewpoints is now increasing for Bangladesh as it endeavours to strengthen its monetary and financial systems in the face of changing global dynamics.

In order to attract foreign direct investment (FDI), maintain currency stability, and establish connections with global financial markets, Singapore, Dubai, and India’s GIFT City have all effectively used offshore centres.

Following the global practice, Bangladesh may actively consider establishing an OFC or OBC which will be able to manage money, enhance net foreign assets, and help maintain price and economic stability by stabilising the local currency. OFC will target the benchmark interest rate on foreign currencies, and manage liquidity inflows and outflows to protect against inflation and currency shocks. This calculated action may bring a new opportunity for financial integration as well as indirect monetary policy intervention through increased regulatory innovation, liquidity management, and capital inflows.

However, it also raises concerns about capital flight, money laundering, and regulatory flaws that could jeopardise Bangladesh’s financial system’s stabilisation. OFCs are well known for ‘hiding tax liabilities or ill-gotten gains from authorities’. In this connection, the establishment of a strong regulatory framework, meticulous risk management protocols, and international collaboration are necessary for the effective implementation of OFCs in Bangladesh.

AS a stratigic monetary tool: Traditionally, central banks use tools such as interest rate adjustments, open market transactions, and reserve requirements to regulate the money supply to contain inflation and maintain macroeconomic stability. In a globalised financial system, offshore financial centres provide supplementary, market-driven processes that affect monetary dynamics through private sector contacts and cross-border finance.

The offshore jurisdiction usually has minimal or no taxation, and provide regulation and legal frameworks promoting international financial transactions with less transparency. Several studies ((Blinder, A. S., 2008 and Hutchison, M. M., 2009) show that a non-convertible offshore financial centre offers extensive financial services, low tax rates, and appeals to foreign investors. So, the centre may influence monetary policy by directly effecting capital flows and liquidity management on the Financial Account. Funds channelled through OFC may have zero effect on money supply. It is hypothetically illustrated in Table-1.

On the other hand, a fully convertible offshore financial centre may facilitate total currency convertibility and encourage unfettered capital movement, potentially impacting exchange rates and monetary stability and directly affecting the current account.

Bangladesh can consider an OFC/OBC as a strategic monetary policy tool rather than a comprehensive liberalisation strategy. It could establish a unique offshore financial hub focused on enhancing connectivity within South Asia and ASEAN, attracting Islamic finance, green bonds, and technological investments, while enhancing monetary and financial sovereignty through diversification. Bangladesh can incorporate its new banking regulations into a comprehensive offshore financial centre or offshore business centre structure.

How it MAY work: In contrast to more conventional methods like interest rates, reserve requirements, or open market operations, which Bangladesh Bank currently uses, OFC can act as an indirect but effective monetary policy tools. OFC usually works by influencing the larger financial environment through international capital flows, foreign currency liquidity, and offshore borrowing/lending regimes, whereas traditional instruments directly affect liquidity and inflation through local banking processes.

OFCs influence the money supply through mechanisms such as currency swaps, offshore deposits, and capital repatriation, which contrast with the central bank’s regulated domestic operations. For example, Offshore Banking Units (OBUs) in Bangladesh efficiently increase the available credit base and money supply by using up to 30 per cent of their regulatory capital from Domestic Banking Units (DBUs). This is accomplished through market-based offshore operations and is comparable to the multiplier effect that is typically connected with central bank initiatives.

In addition, OFCs draw FDI and remittances, and offer a platform for foreign currency management and hedging. All of these have an impact on local liquidity and the exchange rate. OFCs bring dynamic, market-responsive mechanisms that interact with global capital markets, either enhancing or reducing domestic monetary trends, in contrast to the static character of conventional methods. As a result, even though OFC is not considered standard monetary tools, its growing function in controlling liquidity, maintaining exchange rate stability, and affecting credit availability makes them complementary and strategically important monetary policy tool in a networked financial system.

By using global capital flows to affect important macroeconomic factors including liquidity, interest rates, currency rates, and the money supply, the establishment of an OFC can be a strategic addition to a nation’s monetary policy toolkit. OFCs function through the architecture of global finance, facilitating cross-border investment, enabling risk management, and luring foreign capital under advantageous regulatory and tax regimes, in contrast to traditional instruments like interest rate adjustments or open market operations.

OFCs also provide liquidity to the domestic financial system by attracting foreign capital inflows through tax breaks and regulatory latitude, which can reduce interest rates and boost the economy. On the other hand, they can also direct domestic money abroad in pursuit of risk diversification or higher rates, which could affect local liquidity and lead to central bank action to preserve monetary stability. Thus, OFCs serve as both channels and buffers, affecting the domestic money supply in accordance with the more general objectives of monetary policy.

Additionally, by providing alternate channels for capital allocation and investment, OFCs lower domestic financial volatility, promote financial innovation, and offer tools for hedging and diversification. Additionally, they provide as venues for regulatory arbitrage, which, when properly controlled, can enhance domestic laws by providing flexibility without jeopardising systemic stability. Well-regulated OFCs can strengthen creditworthiness, draw in long-term investment, and assist the central bank in better managing inflation, exchange rate pressures, and economic shocks when they are closely linked with a nation’s monetary governance. Therefore, OFCs are more than just offshore financial havens; they may also serve as sophisticated enhancers of monetary policy, offering leverage and flexibility in a financial system that is becoming more interconnected by the day.

In order to maintain price stability and economic expansion, Bangladesh Bank controls the money supply through the use of instruments such as interest rates, reserve requirements, and open market operations. With foreign reserves of about $21 billion, broad money (M2) is valued at Tk 17 trillion as of 2024. Due to changes in capital allocation, Bangladeshis’ offshore assets decreased from $8.145 billion in 2021 to $5.91 billion in 2022. Liquidity and foreign exchange availability are impacted by the Tk 83,826 crore ($9.5 billion) in loans held by offshore banking units (OBUs). Maintaining Bangladesh’s macroeconomic stability still depends on effective monetary policy that is in line with controlling both domestic and foreign financial flows.

Variety of instruments: A wide variety of financial instruments that are essential for international liquidity and capital mobility are traded by offshore banking and financial centres. These consist of commodities futures, money market instruments, hedge funds, private equity, and foreign exchange. Centres for SBLC monetisation, trade financing, collateral transfers, and international guarantees include the Cayman Islands, Singapore, and Hong Kong because they provide regulatory simplicity and tax neutrality. These products have a major impact on financial flows, encourage investment, and stabilise markets in both host and participant nations by promoting risk management, improving liquidity, and drawing in international capital.

So, Bangladesh may consider setting-up strategically placed integrated offshore zones like Matarbari, Moheshkhali, Sabrang (Marine Drive), and the Northern Special Economic Zone (NSEZ) in order to optimise the advantages of OFCs or OBCs. By providing competitive tax holidays, regulatory flexibility, and streamlined processes in line with international OFC best practices, these zones can serve as pilots for OFC operations. To ensure the integrity and security of offshore transactions, a strong legal and compliance framework must be established, especially to implement the Countering the Financing of Terrorism (CFT) and Anti-Money Laundering (AML) standards.

OFCs and OBCs should support capital inflows, financial instrument diversity, and Taka stability in line with Bangladesh’s larger monetary policy objectives in order to increase macroeconomic resilience. Furthermore, if Shariah-compliant, there is an opportunity for OFC to open an investment window of the Islamic banks in the country.

End note: In the real word, to what extent a full-fledged OFC can perform as a strategic monetary tool is a matter of thorough study backed by empirical evidences. For Bangladesh, it is a new concept and requires further examination. The experiences of the country’s OBUs, however, indicate that the policymakers need to look into the matter and seriously consider setting up an OFC in Bangladesh.

Md Saidul Islam CDCS is First Vice President and Head of OBU

The Premier Bank PLC, Gulshan Branch.​

 

[Saif]

Autonomy for BB

If everything goes according to the plan, the Bangladesh Bank (BB)---the country's monetary authority, is all set to emerge as an autonomous financial institute. To make this happen, as incumbent governor of the central bank Dr Ahsan H Mansur discloses in an interview with the FE, the process of br

thefinancialexpress.com.bd

Autonomy for BB

Published :
May 29, 2025 01:07
Updated :
May 29, 2025 01:07

If everything goes according to the plan, the Bangladesh Bank (BB)---the country's monetary authority, is all set to emerge as an autonomous financial institute. To make this happen, as incumbent governor of the central bank Dr Ahsan H Mansur discloses in an interview with the FE, the process of bringing about the necessary revision to the Bangladesh Bank Order 1972 is under way right now. With this move Bangladesh stands poised to break free from the stereotyped notion that only the developed, not the developing or least developed, countries deserve independent central banks. In fact, the central bank in every country should enjoy some degree of independence in performing its core functions like monetary policy and financial stability. It may be accountable as much as required for maintaining transparency and responsiveness to crises through reporting to the finance ministry or parliament.

The nation will be waiting to see how far the horizon of the BB's autonomy can be extended under the legal provisions now getting worked out on the anvil. That the incumbent BB governor has made it clear that he has not been under any pressure from the government is understandable. It is, however, one thing under the rule of an interim government but quite another when a political government takes over. Political governments more or less exert pressure on the central banks everywhere at times to take popular decisions for reasons of political expediency. The national banks in advanced countries have safeguards equal to the task of withstanding such pressures without getting swayed by political pressures in favour of adopting short-term populist policies. Instead, the central bank undertakes the task of navigating the tortuous and painful course to achieve the long-term economic goals even if the policy is unpopular. If the BB is made structurally sound and legally strong to go about the business of focusing on its long-term goals such as framing effective monetary policy, controlling inflation and managing financial crises arising even out of external developments, it will be an excellent job.

It must be recognised that the BB has already given a good account of itself. During the remaining period, it will have to build on this to leave a legacy for the political government to continue with such an enabling equation. If this happens, it will be a great gift from the incumbent governor and the interim government to the nation. It is because of such mutually beneficial relations between the government and the BB, the later could take a few unpopular decisions such as leaving the exchange rate between dollar and Taka on the open market and supporting at least two banks to have an appreciable turnaround.

Next to come, according to the governor, the most crucial decision on the non-performing banks. Merger of a few of them and takeover of others on the basis of assessment the BB made are on the cards now. The banks that face severe liquidity crisis will be taken over but not dissolved. The government can hardly afford to operate such sick banks. If not divested to raise funds, the other ways of their survival will be handing over to private hands or injecting more minted money. The last option is undesirable. Perhaps a middle course based on a combination of disposal of some assets, thriftiness in operation and the barest minimum injection of fund can help wobbling banks to gradually stand on their feet.​

 

[Saif]

Legal flaws, decentralisation fuel banking scams: Saddat

Centralised operations, diversified revenue models, and disciplined governance are vital for the recovery of Bangladesh’s banking sector, said Kimiwa Saddat, Managing Director (current charge) of Community Bank Bangladesh PLC...

www.newagebd.net

Legal flaws, decentralisation fuel banking scams: Saddat
Mostafizur Rahman 03 June, 2025, 21:43

Kimiwa Saddat

Centralised operations, diversified revenue models, and disciplined governance are vital for the recovery of Bangladesh’s banking sector, said Kimiwa Saddat, Managing Director (current charge) of Community Bank Bangladesh PLC.

In an interview with New Age Business magazine, the country’s youngest Managing Director identified the decentralised operational structures still followed by most banks as a root cause of unchecked lending, mismanagement, and inefficiencies.Wellness retreats

‘Unless banking operations are consolidated and streamlined, incidents of mismanagement and fraud will continue, undermining public confidence,’ he said, making the remarks at a time when the country’s banking sector is grappling with one of the worst crises in its history.

He noted that banks currently performing well tend to have more centralised control structures, which allow for more effective risk management.

Saddat identified non-performing loans (NPLs) as the most pressing issue facing the banking sector today.

He argued that the problem extends beyond lending discipline and reflects deeper structural inefficiencies.

While stronger banks are adopting centralised models that promote better governance and risk control, many institutions continue to operate in a fragmented manner, hindering systemic reform.

On the issue of supporting a large number of weak banks through capital injections, despite the economic strain on Bangladesh, Saddat acknowledged that the recovery process would require a long-term commitment, potentially spanning three to four decades.

While capital infusion is one option, he emphasised that it should not be seen as the only path forward. Alternatives such as involving depositors as equity stakeholders or implementing targeted restructuring measures must be explored as part of a comprehensive reform agenda.

Kimiwa Saddat

He expressed optimism that the sector would eventually overcome these challenges.

In his view, the market will self-correct over time, and banks currently underperforming will either adapt or be phased out, resulting in a more robust system overall.

Saddat pointed to the turnaround of previously struggling banks, such as Eastern Bank, which are now among the top performers. These success stories, he said, demonstrate that recovery is possible through sound management, transparency, and strategic reform.

He also believes that forensic audits can play a key role in identifying the extent of losses in weaker banks, thereby providing a factual basis for targeted interventions. Solutions could include fresh capital injections by the government, public-private partnerships, or other innovative financial models.

Commenting on the recent push for bank mergers, Saddat struck a cautious note. While acknowledging that mergers and acquisitions are a potential solution, he does not view them as the first or most effective course of action.

In previous instances where strong and weak banks were merged, mere announcements triggered depositor panic and led to falling share prices for listed banks, he noted.

The complexity of merging banks with wide structural differences makes it a risky and challenging process.

Without thorough planning and clear communication, such strategies can backfire, eroding public trust rather than restoring it.

Beyond the challenges posed by decentralised operations, another major obstacle, according to Saddat, is the outdated legal framework — particularly regarding mortgage foreclosure laws and the decision-making processes for handling defaulted loans.

The sale of mortgaged properties often takes between three and seven years due to legal entanglements.

As such, rules governing mortgage foreclosure must be clearly defined, timelines shortened, and responsibilities allocated through a well-structured decision tree.

Saddat emphasised the urgent need to modernise legal and regulatory frameworks. ‘Without legal reform, other structural adjustments will have limited impact,’ he said.

As long as wilful defaulters are able to exploit legal loopholes and obtain indefinite stay orders, banks will remain exposed.

Saddat stressed the need to enforce existing regulatory provisions designed to penalise such defaulters, warning that without enforcement, reform will remain an illusion.

He also highlighted the profitability strategies of foreign banks operating in Bangladesh.

Kimiwa Saddat

He cited Standard Chartered Bank’s recent financial disclosure, which reported profits of over Tk 3,500 crore despite its comparatively smaller loan and deposit base.

Saddat observed that foreign banks such as HSBC succeed by adopting diversified revenue models that do not rely heavily on interest income. Instead, they generate significant fee-based income, strong treasury operations, and non-funded earnings — particularly from trade finance activities such as letters of credit (LCs).

In contrast, many Bangladeshi banks remain heavily reliant on interest income from loans.

Saddat urged local banks to reconsider their business models by drawing lessons from international best practices.

The key difference, he explained, is that foreign banks enjoy greater credibility and trust in global credit markets. Their LCs are widely accepted, whereas Bangladeshi banks often face difficulties in finding foreign correspondents willing to confirm or process LCs due to concerns over credibility.

This disparity restricts the capacity of local banks to expand their non-funded income, putting them at a competitive disadvantage.

Saddat expressed cautious optimism regarding the government’s recently established taskforce on banking reform.

However, he believes that for the taskforce to be effective, it must focus on a few core priorities: regulatory modernisation, strategic centralisation, diversified revenue models, and disciplined governance.

Addressing the recent surge in depositor anxiety and fund withdrawals, Saddat underscored the importance of restoring public confidence.

He argued that regaining trust requires more than financial measures — it calls for transparency, consistent communication, and visible accountability.

Government agencies and banking leaders must work together to reassure the public that deposits are secure, that defaulters will be held to account, and that reforms are being implemented with genuine commitment and urgency, he said.​

 

[Saif]

Five underperforming banks to merge into Islamic bank

Bangladesh Bank will merge five underperforming Islamic banks into a single entity, which will be structured in line with Shariah-compliant banking principles. The decision came at a meeting on Wednesday, where Bangladesh Bank Governor Ahsan H Mansur met with the managing directors and chairperson

thefinancialexpress.com.bd

Five underperforming banks to merge into Islamic bank
bdnews24.com
Published :
Jun 05, 2025 18:37
Updated :
Jun 05, 2025 18:37

Bangladesh Bank will merge five underperforming Islamic banks into a single entity, which will be structured in line with Shariah-compliant banking principles.

The decision came at a meeting on Wednesday, where Bangladesh Bank Governor Ahsan H Mansur met with the managing directors and chairpersons of the five banks.

According to First Security Islami Bank Chairman Abdul Mannan, the banks involved are Social Islami Bank, Global Islami Bank, First Security Islami Bank, Union Bank, and EXIM Bank.

Four of these banks were previously controlled by Saiful Alam, a Chattogram-based businessman known for his close ties to deposed prime minister Sheikh Hasina.

EXIM Bank’s board was under the control of Nazrul Islam Mazumder, also a close associate of Hasina.

The merger process is expected to begin after Eid-ul-Azha, taking approximately three and a half months.

A new board will be formed, comprising existing board members and representatives from various sectors. Until the merger is complete, the banks will operate under the direct supervision of the central bank.

It has also been decided that the newly formed bank must reduce its total defaulted loans to below 10 percent. The banks’ assets will be consolidated, and bad assets will be transferred to a management company.

A fresh banking licence will be issued by Bangladesh Bank for the newly formed entity. The government, along with international development partners, will provide the required capital. Budgetary allocations have already been made in the 2025-26 fiscal year.

The entire process will be carried out under the upcoming Bank Resolution Ordinance 2025.

Mannan expressed optimism that the move would bring much-needed stability to the banks, and confirmed that the new bank will follow a fully Shariah-compliant model.

He also acknowledged that most of the loans that were issued while these banks were under S Alam Group’s influence have turned into defaults, severely weakening their financial position.

“After the merger, the number of branches will increase and customer service will improve,” he added.

“Initially, these banks will be brought under state control, after which the government will seek foreign investors for privatisation,” Mannan said.​

 

[Saif]

Banks fail to implement BB directive to keep adequate cash at ATMs during Eid holidays

Banks have failed to follow Bangladesh Bank's (BB) instructions to keep ATM boothsin service during the Eid holidays. There is a 10-day holiday from June 5 to June 14 on the occasion of Eid-ul-Azha. Banks are also closed during this holiday. As a result, ATM booths have become the only hope for w

thefinancialexpress.com.bd

Banks fail to implement BB directive to keep adequate cash at ATMs during Eid holidays

Published :
Jun 13, 2025 00:17
Updated :
Jun 13, 2025 00:17

Banks have failed to follow Bangladesh Bank's (BB) instructions to keep ATM boothsin service during the Eid holidays.

There is a 10-day holiday from June 5 to June 14 on the occasion of Eid-ul-Azha. Banks are also closed during this holiday.

As a result, ATM booths have become the only hope for withdrawing cash. But during this long Eid holiday, the booths have not provided the desired service. Customers are facing hardships.

Most of the ATMs in Dhaka city are now out of service or out of operation. The same is true of ATMs located in different districts.

The central bank announced in a circular on May 29 that all scheduled banks in the country will have to provide sufficient money to their ATM booths to allow customers to make smooth financial transactions during the Eid holiday.

Bangladesh Bank instructs commercial banks every year before Eid to keep sufficient money in the booths and have a system for refilling around the clock. But in reality, this is not reflected.

Several bank officials told UNB that ATM booths are usually operated in two ways - one is a booth attached to the bank branch, and the other is a separate or independent booth. The booths adjacent to the branch are operated by that branch.

Since the banks were closed last Thursday during the Eid holiday, new money could not be deposited in these booths because all the branch officials were on leave. However, some banks have taken special initiatives and have kept some officials in charge only for filling money in ATMs.

As a result, although some booths had money, most were empty.

An official of Bangladesh Bank said, "We have already given instructions so that sufficient money is kept in each booth."

However, there are complaints at the field level that many banks are not following those instructions.​

 

[Saif]

Local, foreign banks scramble for LC financing

Six proposals from national and international commercial banks have so far been received as the bankers queue up for funding Bangladesh's LNG import with the World Bank playing the guarantor, officials said. Now, they said, the country's energy and mineral resources corporation - nicknamed Pet

thefinancialexpress.com.bd

WB-GUARANTEED REVOLVING FUND FOR LNG IMPORT
Local, foreign banks scramble for LC financing
First-year guarantee to fetch $350m under 'Revolving LC facilities' scheme

FHM HUAMAYN KABIR
Published :
Jun 13, 2025 00:51
Updated :
Jun 13, 2025 00:51

Six proposals from national and international commercial banks have so far been received as the bankers queue up for funding Bangladesh's LNG import with the World Bank playing the guarantor, officials said.

Now, they said, the country's energy and mineral resources corporation - nicknamed Petrobangla -- is negotiating with the aspirant banks on the possible rate of interest on their loans and other charges for the import of liquefied natural gas from the global market.

The World Bank's soft lending window, the International Development Association (IDA), has come forward with a US$350 million worth of loan guarantee for facilitating the fuel import to meet Bangladesh's growing energy demand, they said.

"We have got six expressions of interest (EoIs) from national and international banks. Now we are negotiating with them on the rate of interest and other charges," a senior Petrobangla official told the FE Thursday.

They have a plan to suggest the commercial banks to form a consortium to support the government in importing LNG with the guarantee of the multilateral funding agency.

The Washington-based lender's soft-lending window has assured Bangladesh of underwriting loans needed to foot the bill worth $350 million for LNG import. This amount falls under a 'Revolving LC facilities' scheme.

"In the first phase, we have talked to the aspirant commercial banks on their LC-opening rate and charges for other services for the LNG import. We hope we will get a competitive rate from them," says a senior Energy and Mineral Resources Division (EMRD) official.

"After finalising deal with the commercial banks or with their consortium, we will welcome the IDA's guarantee scheme and will open LCs for importing the LNG."

The EMRD considers the WB proposal as a new avenue for Bangladesh in LNG supply to feed the country's growing fuel demand.

Another senior EMRD official says although the WB has proposed to help Bangladesh in importing liquefied natural gas or LNG worth up to $350 million annually from the international market, it also offers that the facility will be enhanced over the next seven years.

The proposed first tranche of credits for the first year will be a 'revolving LC facility' for securing the corporation's long-term working capital for smooth import of the liquid gas that supplements the supplies from the national gas grid amid gas-exploration stalemate in the country.

According to the proposal, for the revolving LC-facilitating funds the IDA will charge SOFR-plus 2.0 per cent. Its LC-opening period will be three months and the repayment period nine months.

The EMERD official says after getting the EoI from the commercial banks, they will compare the proposal with other financing facilities like the ongoing credit facility from the Islamic Development Bank (IsDB)'s ITFC.

"If we find it concessional than the other existing facilities, we will go for taking the IDA offer."

The ITFC has recently confirmed $600 million worth of loans for Bangladesh to import fuels and fertilisers from the overseas market.

Bangladesh government will borrow $600 million from the ITFC to import fuel oils, LNG, and fertilisers. The loan will carry an interest rate of six-month SOFR-plus 1.80 per cent, along with a 0.2-percent administrative fee.

As per IDA's proposal, some local and foreign banks will arrange the loan for opening LNG- import LCs. The IDA will be the guarantor on the loans from the commercial banks on behalf of the importer, the state-run Petrobangla.

Following Bangladesh's natural gas-supply shortages from its own gas fields across the country-largely for neglecting new exploration-it has imported the liquid gas from overseas market over the last few years in a bid to meet local energy demand.

The LNG import started in the 2018-2019 period. Since then, the imported fuel has played a vital role in meeting the country's growing gas demand.

In 2022, the country imported a substantial quantity of LNG, to the tune 5.06 million metric tonnes, from Qatar Gas, Oman Trading, and the spot market at a cost of US$4.555 billion.

Last year, a total of 86 LNG cargoes were imported-- 56 from long-term suppliers and 30 from spot market, the official mentions.

Bangladesh will need to import 30-Mtpa LNG to meet the growing local demand by 2041 as domestic gas reserves are depleting fast, according to a global report of the Copenhagen-based research firm Ramboll in association with Geological Survey of Denmark and EQMS Consulting Limited.

The country's "existing gas reserves will run out by 2038 if no new exploration and discovery take place," the report reads about the alert.​