[🇧🇩] Banking System in Bangladesh

[Saif]

Why central bank independence matters

In a landmark step toward central bank independence, the interim government has reportedly drafted the 'Bangladesh Bank Order, 2025', aiming to elevate the central bank to the status of a constitutional body. Currently, the central bank operates as a 'body corporate' under the Bangladesh Bank Order

thefinancialexpress.com.bd

Why central bank independence matters

Atiqul Kabir Tuhin
Published :
Jul 16, 2025 22:47
Updated :
Jul 16, 2025 22:47

In a landmark step toward central bank independence, the interim government has reportedly drafted the 'Bangladesh Bank Order, 2025', aiming to elevate the central bank to the status of a constitutional body. Currently, the central bank operates as a 'body corporate' under the Bangladesh Bank Order, 1972, and is meant to be autonomous. But political interference, as was evident during the Awami League regime, seriously undermined its autonomy, leading to a cascading effect on the broader economy, from hyperinflation to the near collapse of the banking sector. As a result, there have been discussions and recommendations, including from the International Monetary Fund (IMF), to amend the Bangladesh Bank order to grant the central bank more autonomy, particularly concerning monetary policy and governance of the financial sector.

The crucial role of an independent central bank in achieving price stability is widely acknowledged. As economist John Maynard Keynes famously remarked, price stability should be the foremost goal of monetary policy, a goal unattainable without central bank independence. Keynes believed that a central bank, free from political influence, is better positioned to focus on maintaining stable prices, which is fundamental for a healthy economy. Empirical studies support this view, showing that countries with more autonomous central banks tend to manage inflation more successfully. Citing the experiences of several emerging markets in recent decades, experts argue that central bank independence is the most effective monetary policy governance model to date.

Under such a framework, price stability is achieved by separating monetary policy decisions from the grip of political influence. The separation helps counteract political business cycles. These cycles occur when governments pursue populist and expansionary policies in a bid to ensure their re-elections. While such policies, like increased public spending or easy credit, might initially boost economic activity and garner popular support, it invariably leads to inflationary pressures in the long run. An independent central bank can act as a bulwark against such short-sighted political maneuvering, focusing instead on long-term economic stability.

In the context of Bangladesh, it is not difficult to see the benefits of adopting independent central bank model. In fact, the lack of price stability and the soaring of inflation into the double digits domain under the previous Hasina government serve as a stark example of the cost of printing money to manage outsize fiscal spending. Instead of challenging the regime's pernicious policies, the then subservient BB governors did everything to pander to the whims of the government. From artificially managing the exchange rate and enforcing 'nine-six' caps on bank lending rates, to turning a blind eye-if not actively colluding-to the plundering of state-owned and several private commercial banks, and increasing money supply by printing new money, the policy failures of the central bank during the AL regime were beyond acceptable limits. Had the central bank been truly autonomous, much of the inflationary pressure and the banking sector's distress from rising non-performing loans (NPLs) could be avoided.

Against this backdrop, the proposal to grant Bangladesh Bank constitutional status is both timely and essential. However, simply recognising the BB as a constitutional body won't suffice as numerous existing constitutional bodies - such as the Public Service Commission, Election Commission, and even the judiciary - have not been immune to brazen political interference.

The draft BB order proposes, among other provisions, the formation of a search committee tasked with preparing a shortlist of candidates for the positions of governor and deputy governors. Based on the committee's recommendations, the Prime Minister would nominate candidates. But the appointment as well as removal of the Governor and Deputy Governors will require parliamentary approval. And the governor will be accountable to parliament.

However, in Bangladesh's political culture, monetary policy issues are rarely debated in Parliament. Even under the existing BB order, the Governor is technically accountable to the parliamentary standing committee. Yet, over the past decades, not a single Governor was seen being questioned by Parliament, not even following the unprecedented cyber heist when hackers stole close to 100 million dollars from the reserves. So, legislation alone is not enough, what matters is strong political will for its genuine enforcement.

To shield Bangladesh Bank from political interference, experts underscore the importance of establishing clear and stringent criteria for the appointment of the Governor and Deputy Governors. They argue that the Prime Minister should not have unchecked authority to appoint candidates at will. Instead, the formation of a search committee should be clearly defined and it should be empowered to recommend individuals who are not only technically competent and experienced but also independent-minded and capable of resisting political pressure. Legal provisions are essential, but their effectiveness ultimately depends on the mindset and integrity of those in power. Even if the law guarantees central bank autonomy, no institution can operate independently unless its leadership genuinely upholds that spirit.

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[Saif]

10 banks rated sustainable in BB’s 2024 evaluation

Bangladesh Bank first introduced the sustainability rating system in 2020

www.thedailystar.net

10 banks rated sustainable in BB’s 2024 evaluation
Bangladesh Bank first introduced the sustainability rating system in 2020

Ten private commercial banks and two financial institutions have been rated as sustainable financial institutions in the Bangladesh Bank's Sustainability Finance Report 2024.

The top-rated banks this year are BRAC Bank, City Bank, Dutch-Bangla Bank, Eastern Bank, Jamuna Bank, Mutual Trust Bank, NCC Bank, Prime Bank, Pubali Bank, and Shahjalal Islami Bank.

Among them, BRAC Bank, City Bank, Eastern Bank, Jamuna Bank, Mutual Trust Bank, and Prime Bank also featured in the 2023 rankings.

In contrast, Exim Bank, Trust Bank, United Commercial Bank, and Uttara Bank—previously ranked in 2023—have dropped off the list in 2024.

Among financial institutions, IDLC Finance and IPDC Finance retained their places in the sustainability rankings for the second consecutive year.

The central bank evaluates banks and financial institutions based on five key indicators: the Sustainable Finance Index, CSR activities, green project financing, the Core Banking Sustainability Index, and Banking Services Coverage.

Core Banking Sustainability and Banking Services Coverage jointly account for around 60 percent of the total score.

Banks with strong risk management, healthy capital adequacy, and low non-performing loans receive higher scores under these metrics.

Specifically, the Core Banking Sustainability score considers the net NPL ratio, Tier-1 capital to risk-weighted assets, provision maintenance, CMSME loan share, and large-loan portfolio exposure.

The Services Coverage component, weighted at about 10 percent, evaluates reach through branch networks, number of deposit and loan accounts, and agent banking outlets.

Bangladesh Bank first introduced the sustainability rating system in 2020 to encourage financial institutions to integrate environmental, social, and governance (ESG) considerations into their operations.​

 

[Saif]

Currency paradox: Why is BB buying dollars?

After years of depreciation that saw the taka lose nearly 30 percent of its value against the US dollar since the Covid-19 pandemic, the local currency is finally showing signs of strength.

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Currency paradox: Why is BB buying dollars?

After years of depreciation that saw the taka lose nearly 30 percent of its value against the US dollar since the Covid-19 pandemic, the local currency is finally showing signs of strength.

However, in a surprising turn of events, the Bangladesh Bank has swiftly intervened to halt the US dollar's decline, raising questions about its exchange rate management.

The relentless rise of the US dollar for years has been a primary driver of economic strain in Bangladesh.

It has been a key factor behind soaring inflation, which has remained stubbornly above 9 percent since March 2023, causing hardship for consumers and importers.

While inflation saw a slight dip to 8.48 percent in June, the pressure on household budgets remains immense.

For months, economists and policymakers have pointed to the high exchange rate as a major culprit for the persistent inflation.

Businesses, especially those reliant on imports, have borne the brunt of the powerful US dollar, while exporters and remitters have benefited.

Now, with the taka finally gaining ground to some extent, the central bank has stepped in.

In just two days, Bangladesh Bank purchased $484 million from commercial banks as the exchange rate fell by more than Tk 2 in five days, dropping to Tk 120 against each US dollar.

Following this intervention, the interbank selling rate climbed back to Tk 121.20 on Wednesday.

This prompts a crucial question—why is the central bank seemingly preventing the taka from gaining strength?

One explanation lies in the central bank-managed exchange rate system.

Despite adopting a more flexible regime in May as part of a $5.5 billion loan agreement with the International Monetary Fund, the system is not entirely market-driven.

Bangladesh Bank maintains an exchange rate band and intervenes when the currency moves outside its desired range.

An exchange rate band is a system where a country's central bank sets a target value for its currency against a foreign currency (or a basket of currencies) and allows the exchange rate to fluctuate within a specific range, or "band," around that target.

This approach falls between a completely fixed exchange rate, where the currency's value is pegged and does not fluctuate, and a purely floating exchange rate, where market forces of supply and demand determine the rate without any central bank intervention.

Areif Hussain Khan, executive director and spokesperson for the central bank, defended the intervention, saying the regulator's goal was to prevent excessive volatility.

"We want to keep the forex market stable because neither a big rise nor a steep fall is a good indicator. If the dollar weakens too much, exporters and remitters feel discouraged and suffer losses," he said.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, criticised the central bank's intervention in the foreign exchange market.

He argued that allowing the US dollar rate to decline further could help ease inflationary pressure.

"Over the past three years, various analyses have explained why inflation has increased in Bangladesh. While opinions vary, one consensus has emerged—the rise in the US dollar's value," he said.

He added that reducing the exchange rate from Tk 120 to around Tk 110 could have had a remarkable impact in curbing inflation.

"So, the question is, why is this opportunity to curb inflation being missed?" asked Hussain.​

 

[Saif]

undefined | The Financial Express

thefinancialexpress.com.bd

Banks to remain closed on August 5

BSS
Published :
Jul 17, 2025 19:37
Updated :
Jul 17, 2025 19:37

All scheduled banks across the country will remain closed on August 5, 2025, marking the observance of the government-declared holiday marking “July Uprising Day.”

To this end, the central bank on Thursday issued a circular through its Department of Off-site Supervision, instructing all scheduled banks to suspend operations on that day in compliance with the holiday announced by the government.​

 

[Saif]

Banks borrow record Tk 1.45t in a month as liquidity dries

Fund funnelling from the central bank into commercial banks in Bangladesh through repo instrument hits a record high of over Tk 1.45 trillion in June, indicating their severe liquidity crunch. Deposit growth remains slow amid higher non-performing loan (NPL) regime following past misrule in the ba

thefinancialexpress.com.bd

Banks borrow record Tk 1.45t in a month as liquidity dries

JUBAIR HASAN
Published :
Jul 19, 2025 00:10
Updated :
Jul 19, 2025 00:10

Fund funnelling from the central bank into commercial banks in Bangladesh through repo instrument hits a record high of over Tk 1.45 trillion in June, indicating their severe liquidity crunch.

Deposit growth remains slow amid higher non-performing loan (NPL) regime following past misrule in the banking sector while government bank borrowing also ballooned to make up for revenue deficit, bankers and money-market analysts say about the banks' desperate need for liquidity feeding.

They say the volume of commercial lenders' borrowing through repo window of the Bangladesh Bank (BB) continues ballooning to meet their local-currency obligations.

According to the latest data available with the BB, the country's scheduled banks altogether borrowed Tk 1.45 trillion from the banking regulator under the repo facility in June 2025.

Off the amount, around 75 per cent was taken using 14 days' maturity while remaining Tk 275 billion and Tk 91.05 billion came from 7-day maturity and overnight facility.

Under the repo-backed liquidity facility from the central bank, the figures of borrowed funds were Tk 1.33 tillion, Tk 940 billion and Tk 838 billion in May, April and March last, the data showed.

The commercial lenders needing short-term liquidity are largely bent on 14-day-tenure repurchase instrument of the BB and keep banking on it as much as possible. As a matter of fact, the volume of credits handed out through the liquidity-availing window continues surging.

But there are allegations by a number of bankers and BB officials that some of the commercial lenders frequently use such instruments to avail short-term funds but invest those in long-term government securities to gain more under the persisting economic sluggishness, which plays a significant role in the squeezing of yields on treasury bills and bonds.

Seeking anonymity, a BB official says the rising use of the repo-backed funds indicates that majority of the commercial banks have been facing serious liquidity crunch in recent times.

The central banker says the deposit growth remains low in recent times because of trust deficit in the banking system after massive-scale loan-related irregularities got exposed following the July-August mass-uprising that toppled Sheikh Hasina's governing regime.

On the other hand, the BB official says, the volume of NPLs in banks keeps mounting to reach Tk 4.20 trillion, almost one-fourth of the entire loans worth Tk 17.13 trillion disbursed by the banks until March last.

"So, the banks have no other option but to rely heavily on central bank repo instrument to overcome the formal credit mismatch," the central banker adds.

He mentions that the government roughly borrowed some Tk 1.24 trillion from the banking system in the last fiscal year (FY'25). Of the borrowed funds, the government paid back over Tk 300 billion to the central bank in the form of meeting its previous liabilities.

According to the BB data, the deposit growth stood at 8.21 per cent by April last. It was more than 12 per cent even three years ago.

On condition of anonymity, the treasury head of a commercial bank said commercial banks normally use the short-term liquidity instrument of the BB to meet CRR (cash reserve ratio) requirement.

But the reality is different. The commercial lenders frequently use such instruments to avail short-term funds but invest those in long-term government securities to gain more under the persisting economic sluggishness, he told the FE.

Sharing statistics, the seasoned banker says the banks need to keep 4.0 per cent as CRR with the central bank, which is around Tk 750 billion. But the banks borrowed Tk 1.45 trillion in June last.

"It indicates how serious the liquidity crunch in banks is. If the BB stops giving repo facility for a couple of weeks, majority of the banks will collapse," he said

Under such circumstances, the treasury head said the banking regulator keeps squeezing repo facility following the lending condition set by the IMF (the International Monetary Fund), which is "unfortunate".

The regulator has already curtailed repo facility once a week from daily handouts. It also discarded 28-day repo and is about to scrap 14-day window from October next.​

 

[Saif]

How challenging transition to cashless transaction is

Banking has been undergoing transformation at a phenomenal rate. The latest trend apparently runs counter to the very concept of bank serving as a depository of cash or currency. Maintenance of cash -- enormous sums to be precise, is costly. How costly it can be is revealed by Bangladesh Governor D

thefinancialexpress.com.bd

How challenging transition to cashless transaction is

FE
Published :
Jul 22, 2025 00:05
Updated :
Jul 22, 2025 00:05

Banking has been undergoing transformation at a phenomenal rate. The latest trend apparently runs counter to the very concept of bank serving as a depository of cash or currency. Maintenance of cash -- enormous sums to be precise, is costly. How costly it can be is revealed by Bangladesh Governor Dr Ahsan H Mansur. According to him, Bangladesh has to spend a fabulous sum of Tk 200 billion on management of cash each year. Along with the central bank which alone prints bank notes, 61 commercial banks have to bear the costs of maintenance of idle money, transportation, security, insurance, storage, teller services, and sorting instruments. Printing of each currency note has a cost. If 1,000-taka note costs around Tk5.0-6.0, printing costs of notes of smaller denomination and coins in particular may exceed the value of those notes and coins. In a country where currency notes are subjected to all kinds of abuse, it is not surprising that an additional cost is involved annually with reprinting of 13 per cent banknotes rendered damaged.

Clearly, cashless transaction and transfer of large amounts of money digitally for payment and other purposes can drastically bring down the expenditure on cash management. The country also stands to benefit immensely if its informal sector governed mostly by black money or unaccounted-for economy, thought to be bigger than the formal one, can thus be curbed. So the positives are many if the country can plan for a systemic transition to a cashless society. That calls for payment of small amounts of daily transaction through QR codes to online transfer of big amounts in financial deals by using financial services like PayiO or wire transfer via banks. Cost-cutting and avoidance of physical contact and hassles in such transactions are highly desirable.

Yet things are not very simple and straightforward as one would like them to be. Unless cent per cent cybersecurity and digital protection can be ensured, clients are unlikely to be convinced of such transactions. The notorious digital heist at the Bangladesh Bank has not helped the cause. Breaching of cybersecurity cannot be ruled out unless the cyber unit of each bank or financial institution is manned by highly efficient and knowledgeable staff. Then there is the issue of digital and financial literacy, without a reasonable level of which confidential financial transactions can expose such operations to cybercriminals always on the lookout for banking heists.

Last but not least, the deplorable law and order situation in the country certainly points to make digital transaction safe and secure but the investments made in infrastructure like ATM booths -- so long considered convenient -- are likely to prove to be a waste of money with the booths falling in disuse. Anti-social elements, particularly those looking for innocent victims to commit financial crimes have their own novel way of breaching security codes. In the latest such incident, a 28-year-old young man from Shripur was lured into a private car before taking him hostage and snatching away his debit and credit cards for swindling about Tk600,000 from his accounts in four banks on Saturday last. His flight abroad was scheduled the same night. So without improving the law and order, embarking on a course of cashless transactions may be fraught with danger.​

 

[Saif]

Challenges still remain in banking sector in Bangladesh

Bangladesh’s banking sector has seen some tangible reforms over the past one year under the interim government, but a sustainable recovery of the sector damaged badly during the past government is constrained by some knotty challenges such as rising non-performing loans, outdated regulations and...

www.newagebd.net

ONE YEAR OF JULY UPRISING
Challenges still remain in banking sector in Bangladesh
Mostafizur R0ahman 23 July, 2025, 23:27

Bangladesh’s banking sector has seen some tangible reforms over the past one year under the interim government, but a sustainable recovery of the sector damaged badly during the past government is constrained by some knotty challenges such as rising non-performing loans, outdated regulations and weak institutional capacity, economists said.

The interim government led by Professor Muhammad Yunus assumed office on August 8, 2024, three days after the ouster of the Awami League-led authoritarian regime in a student-led mass uprising.

The Bangladesh Bank under Ahsan H Mansur, who became the central bank governor after the 2024 political changeover, has gone for reforms to address deep-rooted maladies such as loan irregularities, political interference and financial malpractice in the country’s banking sector.

M Masrur Reaz, chairman and chief executive office of the Policy Exchange Bangladesh, an independent advocacy firm, told New Age that among all sectors, the banking sector had witnessed the most visible and impactful reforms over the past one year under the interim government.New age products

He said that a huge amount of funds had been looted and laundered from banks by oligarchs who exploited their political connections with the ousted regime.

The powerful business tycoons reportedly siphoned off $17 billion from the banking sector of the country during the 15-year rule of the ousted prime minister Sheikh Hasina.

That cycle of corruption and abuse of power has been stopped due to the BB steps, Masrur Reaz said describing it as a major achievement.

Reaz said that the central bank took decisive steps by reconstituting boards of several banks, thereby removing the influence of politically connected business groups.

This move, he said, has significantly improved governance and helped restore regulatory compliance in those banks.

The BB has restructured boards of 14 banks, removing controversial and politically connected business groups like the S Alam Group.

The S Alam Group had controlled eight private commercial banks directly or indirectly and allegedly withdrew about Tk 2.25 lakh crore from 10 banks in names and anonymously.

The central bank initiated asset quality reviews at banks known to have faced serious corruption and malpractice, aiming to identify the true extent of damage within those banks.

The reporting of non-performing loans and other data had previously been compromised through data manipulation, but the central bank has now brought those reporting practices under stricter oversight and closer to international standards.

Reaz, however, said that the central bank should have established an asset management company to deal with defaulted loans and facilitate recovery of such loans.

He also stressed the need to revisit the country’s legal framework. He said that many existing laws and regulations posed obstacles to effective banking reforms and those should be amended to support the ongoing restructuring efforts.

The sector’s most pressing challenge remains the ballooning non-performing loans.

By March 2025, NPLs reached Tk 4.2 lakh crore — nearly double the figure from a year earlier, representing about 24 per cent of all outstanding loans and are projected to climb further.

The bad loans had long been understated through rescheduling, restructuring, or even data manipulation during the deposed Awami League-led government, which have now been exposed.

The central bank’s move in April to tighten NPL classification by cutting the overdue period from six to three months as per international standard has exposed more hidden bad loans.

The BB has also frozen a massive amount of liquid assets and tangible assets of defaulters and alleged money launderers over the past one year to recover bad loans.

Mustafizur Rahman, executive director of the Centre for Policy Dialogue, a local think tank, said that the banking sector experienced the highest concentration of reforms over the past one year.

He said that the real picture of the sector — long sugar-coated and obscured — had finally been revealed.

He noted that the Bangladesh Bank formed dedicated task forces and engaged international audit firms to conduct asset quality reviews at struggling banks that uncovered deep-rooted irregularities and malpractices.

Mustafizur added that the central bank had been working with weak banks either to restore their financial health or to facilitate their liquidation through mergers.

‘The Bangladesh Bank has plans to establish an asset management company to recover bad loans and has also initiated processes to bring back laundered funds from abroad, although this will take time due to complex legal and diplomatic procedures,’ he said.

Bankers said that due to the mounting NPL, many banks were now facing acute capital shortfalls and provisioning gaps.

Some 19 banks have been barred from declaring dividends for taking deferral facilities against their high provision shortfalls.

While corruption and loan scams have been somewhat curbed, the overall financial condition of these banks has not improved much, the bankers said.

In desperation, the central bank injected about Tk 37,000 crore into nine struggling banks through printing money to meet depositors’ demands, yet the cash crisis persists, with depositors still struggling to withdraw their funds, BB officials said.

Legal obstacles, including court-ordered stays on loan recoveries and delays in enacting new legislation, continue to shield defaulters, they said.

The BB plans to merge a number of private commercial banks through an ordinance, but the process has yet to begin. Similarly, proposals to establish asset management companies and independent recovery units remain in limbo.

Proper rules for bank directors have been announced but not enforced. A significant amount of defaulted loans is linked to bank directors who have granted themselves loans across different banks, exploiting loopholes in regulations.

The central bank continues to uphold lenient loan rescheduling rules, allowing defaulters with the down payment as low as 2.5 per cent and the repayment period of up to 29 years.

Banks have identified over a thousand of wilful defaulters, but the central bank has failed to take decisive measures, despite having the authority to impose travel bans and other restrictions.

Furthermore, no steps have been taken to hold central bank and commercial bank employees accountable for their roles in corruption and loan scams.

The central bank has recently launched a special rescheduling facility for businesses who defaulted on their loans for reasons beyond their control. Under the facility, only a handful of large borrowers have been benefited, but small borrowers are yet to get any support.

Despite these, Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said that the banking sector witnessed the most comprehensive reforms in the past one year.

He cited the formation of task forces, audits by renowned chartered accounting firms, board reconstitutions, and regulatory reviews as positive developments that could help stabilise the sector.

He also noted improvements in the macroeconomic context, pointing out that the balance of payments strengthened, remittance inflows and exports rose sharply, and foreign exchange reserves improved. The exchange rate, too, has returned to a relatively stable position, he said.

Bangladesh’s gross foreign exchange reserve, calculated under the International Monetary Fund guidelines, soared to $24.98 billion on July 17 from $20.47 billion in August 2024.

He, however, said that the central bank should now shift focus towards stimulating private sector credit growth and improving the investment climate.

Without such measures, he warned, the country’s overall economic growth could face significant headwinds despite improvements in banking oversight.

BB executive director Areif Hussain Khan, also the spokesperson for the central bank, said that they were working to restore the people’s confidence in the banking sector and therefore initiated many reform initiatives.

‘Some initiatives have already been implemented, others are awaiting to be executed,’ he said.​

 

[Saif]

Strengthening the central bank

With nudges from the International Monetary Fund and backing from the World Bank and Asian Development Bank, Bangladesh has embarked on a long-overdue three-year reform plan for its ailing banking sector.

www.thedailystar.net

Strengthening the central bank

With nudges from the International Monetary Fund and backing from the World Bank and Asian Development Bank, Bangladesh has embarked on a long-overdue three-year reform plan for its ailing banking sector. This is not a routine clean-up. The system is facing a structural, not cyclical, crisis, as evident by the record Tk 420,335 crore in defaulted loans as of March 2025, of which over Tk 300,000 crore is concentrated in just 10 banks.

The roadmap promises new legislation, better oversight, and institutional reforms to restore governance and credibility, and to spare taxpayers from footing the bill when banks fail. But unless the Bangladesh Bank (BB) transforms into a forward-looking, system-oriented regulator, no amount of legislation will suffice.

The central bank's legacy of regulatory passivity must be dismantled. In previous political regimes, politically supported interests took over several reputable banks, reportedly including a takeover of Islami Bank at gunpoint. By approving acts that went against fiduciary standards, the Bangladesh Bank shifted from being a regulator to more of a bystander. Any roadmap's implementation will stall unless regulatory independence and muscle are restored.

Five key laws—a new Bankruptcy Act, Money Loan Court Act, Distressed Asset Management Act, Bank Resolution Ordinance, and Deposit Protection Ordinance—are expected to take effect by the first quarter of the current fiscal year 2025-26. These are commendable. But laws alone cannot engineer structural change. That requires accountability and the right incentives.

The strength of a central bank lies not in how many transactions it approves, but in how clearly and consistently it sets and upholds market rules. For too long, BB has micromanaged bank operations, approving individual loans, equity deals, and foreign currency transactions, instead of fostering a rules-based financial ecosystem. These reflect deep-seated institutional insecurity.

Modern central banks such as the Reserve Bank of India (RBI) and the Monetary Authority of Singapore focus on systemic stability. They define prudential frameworks, delegate operational autonomy, and monitor large-scale deviations. The RBI's Early Warning Systems and Prompt Corrective Actions have helped lower India's non-performing assets from 11.6 percent in 2018 to 3.2 percent in 2023, according to its 2024 annual report.

Bangladesh must adopt a similar approach. Centralised approvals disincentivise risk-taking, erode institutional strength, and weaken banks' capacity to manage liquidity, assess credit, or absorb shocks. Even during the post-Covid liquidity glut, banks sat on excess reserves, unable to deploy them effectively.

Amending the Bank Company Act to sever political ties from board appointments is a step forward. But implementing this will require a central bank with the backbone to confront entrenched interests. The move to identify banks' ultimate beneficial owners must be followed through rigorously.

Asset recovery also demands institutional muscle. The revamped loan recovery task force must operate independently, free from selective enforcement. Global examples such as Indonesia's OJK Asset Management Company and India's Insolvency and Bankruptcy Code show recovery works best when tied to judicial reforms and real-time surveillance.

The interim government must view this roadmap as a political and institutional reset, not a checklist. Despite its brief term, it must build bipartisan consensus and protect reforms from electoral churn.

The central bank must evolve from a transaction approver into a market architect. It must enforce real-time monitoring, set clear capital standards based on risk, and penalise poor governance. Without such changes, the reform package risks joining a familiar graveyard: well-intentioned, poorly executed, and quickly forgotten.

The question now is: do we have the institutional courage to let the Bangladesh Bank lead?

The writer is an economic analyst and chairman at Financial Excellence Ltd​

 

[Saif]

Banking fix may cost $5b-$6b

The interim government is considering a rescue plan costing around $5 to $6 billion to salvage troubled banks, which are reeling from widespread irregularities during the previous Awami League government, said Finance Adviser Salehuddin Ahmed.

www.thedailystar.net

Banking fix may cost $5b-$6b
Says finance adviser; the amount is way below IMF’s $35b estimate

The interim government is considering a rescue plan costing around $5 to $6 billion to salvage troubled banks, which are reeling from widespread irregularities during the previous Awami League government, said Finance Adviser Salehuddin Ahmed.

This is way below the International Monetary Fund's (IMF) initial estimate of $18 billion, which was later raised to $35 billion.

"The IMF asked us where we would get such a whopping amount. I told them let's see if we can restructure them within $5 billion to $6 billion," Ahmed said at a book launch in Dhaka yesterday.

Former caretaker government adviser Hossain Zillur Rahman's book "Arthoniti, Shashon, O Khamota: Japito Jiboner Alekkho" was unveiled at the programme. BNP Secretary General Mirza Fakhrul Islam Alamgir was also present.

Ahmed said the interim government had inherited an economy on the brink of collapse, but signs of recovery are now beginning to show.

"But it is not fully recovered yet, and a total cure is not a simple task," he added.

Commenting on the scale of economic mismanagement and plundering during the previous government, Ahmed said, "Such looting was not seen in any country in the world."

The interim government is carrying out short-term reforms, while long-term and mid-term reforms will be undertaken by a political government-— Salehuddin Ahmed Finance adviser.

He claimed that up to 80 percent of loans from some banks had been siphoned off.

"For instance, the total outstanding loan of a bank is Tk 20,000 crore, while around Tk 16,000 crore was taken away and they are now bad loans," said Ahmed, an economist and former governor of the central bank.

He questioned whether any public institution remained unaffected. "The law was broken. Process and system were distorted to such a level, it is difficult to do a good task," he said.

He noted that while the institutions remained in place, those responsible for the decay had not been replaced.

"Some people called to depart them all. However, an administration cannot run in such a way. So, we are trying to make them work by either gently persuading or scolding them. A countervailing power is necessary in the government," said the adviser.

Ensuring good governance under the existing political structure is extremely difficult, as there are no effective checks and balances on the prime minister and members of parliament, he said.

"Without reforms here, no matter how many reforms we talk about, it would not make any difference. Reforms are also needed within political parties," said the finance adviser.

He said that while the interim government is working on short-term reforms, it will be up to an elected political administration to carry out long-term and mid-term changes.

"I have realised that it is easy to exploit, but difficult to govern people here," he said.

BNP Secretary General Mirza Fakhrul Islam Alamgir said reforms are needed, but that must not be used as a pretext to delay elections.

"Reforms cannot be carried out overnight, and they take time. So democratic practices should not be delayed for the sake of reforms," Fakhrul said, adding, "Reforms must be made by people's representatives elected through a democratic process."

At the programme, Professor Mahbub Ullah, former chair of the Department of Development Studies at Dhaka University, focused on addressing rising inequality.

Fahmida Khatun, executive director at local think tank Centre for Policy Dialogue (CPD), said good governance is possible only if accountability is ensured, political stability is maintained, law enforcement remains effective, and regulators operate properly.

Despite high GDP growth and development over the past 15 years, most people had not benefited due to poor governance and corruption, she added.

"During this period, it was forgotten that people are at the centre of power," said the economist. "Regulatory bodies such as the Bangladesh Bank, the Bangladesh Securities and Exchange Commission, and the National Board of Revenue lost their institutional strength. As a result, a vested group benefited."

Prof Abu Ahmed, chairman of the Investment Corporation of Bangladesh (ICB), said he found the institution stripped of all assets when he was appointed. "It is a policy of autocracy that creates 'Mafiaism' and loots institutions. ICB was one victim of such an act."

He recommended elections, even if they might not resolve every issue. "Leaders should be elected, which will make them accountable," he said, adding that there must be a system to ensure no one can become an autocrat again, as autocracy damages the economy.

Hossain Zillur Rahman highlighted three essential conditions for reform and good governance.

First, he said, the democratic framework should prevent any individual or group, including within political parties, from becoming the sole source of power. During the previous regime, not only the prime minister but also all 300 parliamentarians acted as power centres in their own constituencies.

Rahman called for the decentralisation of power.

Second, he said the country should be made capable in terms of institutional functionality. Third, democratic behaviour must be practised and embedded immediately.

"It may take time, but there is no way to sit idle, saying it will take time. So practice should start," he said.

The book was published by Aloghar Prakashana. M Humayun Kabir, president of the Bangladesh Enterprise Institute, also spoke at the launch.​

 

[Saif]

Micromanaging should not be Bangladesh Bank’s job

BB must change its identity from an enforcer to an ecosystem architect.

www.thedailystar.net

Micromanaging should not be Bangladesh Bank’s job

VISUAL: FREEPIK

Over the last three decades, Bangladesh Bank (BB) has become an increasingly operational regulator. Today, it reviews foreign loan approvals, dollar deposit flows, and large-ticket transactions on a case-by-case basis, making BB's role more cautious yet reactive, instead of strategic. A developing economy that wants to be a middle-income nation, such micromanagement is no longer tenable.

Globally, modern central banks focus on frameworks, not transactions. The Federal Reserve sets macro-prudential tools—capital adequacy norms, systemic liquidity thresholds, and risk-weighted asset requirements—without intervening in individual deals. The European Central Bank supervises systemic institutions but delegates day-to-day approvals to the banking layer. Even the Reserve Bank of India (RBI), long criticised for micromanagement, has shifted toward a supervisory approach that enables self-regulation through compliance-based incentives.

BB's current role in vetting each dollar deposit linked to external commercial borrowing illustrates the core issue. Instead of setting clear rules of eligibility, compliance documentation, and risk-based pricing bands, it approves every inflow manually. This adds friction, delays, and promotes opacity. According to data from the Bangladesh Investment Development Authority (BIDA), average approval cycles for foreign loans exceed 30-45 days, undermining competitiveness in global capital markets.

Besides, the strict enforcement of the Internal Credit Risk Rating System (ICRRS) has had unintended consequences. While aiming to protect banks from poor credit exposures, it disproportionately blocks smaller borrowers from credit. Large political borrowers, often backed by implicit guarantees, face no such friction. This skewed outcome has starved innovation and enterprise finance and failed to stop the trillions of fraudulent loans in the country.

Banks, in this regime, have stopped asking fundamental questions such as how ICRR ties into forward cash flow predictability or sector-specific volatility. Instead, a compliance mindset has emerged: "Bangladesh Bank required it." Over time, such an attitude has eroded institutional thinking capacity, making banks passive executors rather than strategic financiers. That is perhaps the most damaging long-term cost—when a regulatory environment encourages blind compliance over judgment.

A forward-looking central bank must enable rather than control by defining boundaries, building ecosystems, and letting licensed banks operate with autonomy within those boundaries. This requires: i) shifting from transactional approval to risk-based frameworks; ii) institutionalising supervisory sandboxes and early-warning systems; and iii) enabling ecosystem development instead of direct regulation.

BB should replace transaction-level oversight with sectoral risk frameworks. This includes pre-approved External Commercial Borrowing (ECB) routes for eligible companies with audited financials; risk-weighted credit windows for banks based on their capital base and non-performing loan (NPL) history; dynamic asset-liability matching rules that incentivise long-term lending; and launching multiple sandboxes to test the regulation and policies.

Countries like Malaysia have implemented credit guarantee schemes and sandbox-based regulations that allow rapid experimentation under controlled exposure. According to reports from Bank Negara Malaysia, their innovation sandbox approved 38 new financial products in 24 months with less than one percent regulatory breaches.

BB must also institutionalise a proactive supervision model rather than waiting for banks to default or misreport by building an AI-backed credit risk surveillance tool that flags high-risk portfolios; conducting quarterly asset quality reviews for banks above a certain asset threshold; integrating non-banking datasets (e.g., utility payments, tax records) into borrower scoring; and moving away from collateral-backed lending, and acknowledging other forms of assets.

The Reserve Bank of India introduced a Central Repository of Information on Large Credits (CRILC), mandating banks to report exposures above 50 million Indian rupees. This has significantly improved stress recognition timelines.

BB should catalyse markets, not dominate them. This means licensing independent credit rating agencies and asset reconstruction companies; opening up private distressed asset markets; and facilitating interbank repo and derivative markets to improve price discovery.

Vietnam and Indonesia have liberalised their NPL disposal process, resulting in a 30-40 percent recovery improvement within two years of implementation. According to the World Bank, NPL resolution in Indonesia improved from 22 percent to 63 percent post-reform between 2016 and 2019.

These steps require BB to fundamentally redesign its identity from an enforcer to an ecosystem architect. It must trust its licensed entities to operate under risk-based guardrails and reserve interventions only for systemic risks.

The banking reforms recently outlined with support from the IMF, Asian Development Bank, and World Bank offer a unique opportunity. The Distressed Asset Management Act, the Bank Resolution Ordinance, and the proposed deposit protection enhancements are foundational shifts. However, their success will depend on execution and mindset change.

More critically, Bangladesh Bank must invest in building human capital—regulators who understand structured finance, international bond markets, and fintech-led credit models. Otherwise, BB will continue to regulate yesterday's risks with today's tools, while tomorrow's markets go ungoverned.

Mamun Rashid, an economic analyst, is chairman at Financial Excellence Ltd and founding managing partner of PwC Bangladesh.​

 

[Saif]

Strong banks see massive deposit growth

Several well-performing banks, led by BRAC Bank and City Bank, saw strong deposit growth in the year ending May 2025 as depositors shifted funds away from weaker institutions amid fear of collapse and loss of trust in bank governance...

www.newagebd.net

Strong banks see massive deposit growth
Crisis-hit lenders lose deposits
Mostafizur Rahman 27 July, 2025, 22:55

Several well-performing banks, led by BRAC Bank and City Bank, saw strong deposit growth in the year ending May 2025 as depositors shifted funds away from weaker institutions amid fear of collapse and loss of trust in bank governance.

Bankers said the shift reflects public frustration with troubled banks that continue to restrict withdrawals despite receiving substantial liquidity support from the central bank.

Despite Bangladesh Bank injected over Tk 35,000 crore into nine of the most distressed banks, several of them continued negotiating partial withdrawals due to overwhelming demand, further fueling public anxiety.

The situation worsened as the central bank began enforcing disciplinary measures, including the restructuring of bank boards, the initiation of special audits and merger process — steps that, while intended to restore order, triggered further unease among depositors who feared deeper instability.

Amid this crisis of confidence, depositors flocked to stronger, better-governed banks that are widely perceived as safer and more liquid, according to a Bangladesh Bank data.

BRAC Bank led the pack with a 35 per cent year-on-year deposit growth in May, with total deposits rising to Tk 78,460 crore.

It was at Tk 70,425 crore in December 2024.

City Bank followed with a 28 per cent rise, including its Islamic banking wing, reaching Tk 56,404 crore in deposits in May. It was at Tk 51,751 crore in December.

Jamuna Bank secured the third position, posting a 27 per cent growth to reach Tk 33,230 crore in May. Eastern Bank saw a 21 per cent rise to Tk 48,355 crore over the same period.

Pubali Bank, Dutch-Bangla Bank, and Trust Bank each registered 20 per cent deposit growth, with respective balances at Tk 80,084 crore, Tk 59,448 crore, and Tk 47,601 crore in May respectively.

Other banks showing robust growth include Mutual Trust Bank with 17 per cent, NCC Bank with 14 per cent, Bank Asia with 12 per cent, and Prime Bank with 11 per cent.

These banks are regarded as more resilient due to stronger compliance frameworks and healthier asset profiles.

Even Islami Bank Bangladesh, which has faced serious allegations of loan scams and mismanagement under the control of S Alam Group, managed to post a 7.48 per cent growth in deposits.

The bank began regaining depositor confidence after a major board overhaul in 2024. Its deposit base grew from Tk 1,58,435 crore in December to Tk 1,66,217 crore in May.

Banks associated with the S Alam Group experienced sharp declines.

Social Islami Bank posted a 17.38 per cent negative growth in deposits. First Security Islami Bank saw a 7.73 per cent fall, Bangladesh Commerce Bank 9 per cent, Global Islami Bank 7.15 per cent, National Bank 13.21 per cent, and Union Bank 2 per cent.

Exim Bank, which was under the control of NASSA Group saw 14 per cent fall in May.

The damage to these banks’ deposit bases was somewhat limited only because they restricted withdrawals, failing to meet depositor demands. Without such restrictions, bankers noted, the losses would have been much more severe.

According to central bank data, total deposits in the banking sector, excluding government and interbank accounts, stood at Tk 18,32,065 crore in May 2025, up from Tk 17,00,608 crore a year earlier—representing a 7.73 percent year-on-year increase.

However, bankers said the growth is sharply uneven. While strong banks continue to attract growing volumes of deposits, weaker banks remain under intense liquidity stress.​

 

[Saif]

Modernisation of monetary policy framework

In the process of monetary policy formulation, Bangladesh Bank (BB) has been relying on the monetary targeting approach since its independence, to achieve the ultimate goal of price stability along with financial stability and supporting growth. The possibility of achieving success in maintaining p

thefinancialexpress.com.bd

Modernisation of monetary policy framework
A brief review of Bangladesh Bank's measures
Md Omor Faruq, Mahmud Salahuddin Naser, and Md Ezazul Islam

Published :
Jul 30, 2025 00:45
Updated :
Jul 30, 2025 00:45

In the process of monetary policy formulation, Bangladesh Bank (BB) has been relying on the monetary targeting approach since its independence, to achieve the ultimate goal of price stability along with financial stability and supporting growth. The possibility of achieving success in maintaining price stability under the monetary targeting framework became very difficult, mainly due to changes like the money demand function resulting from financial innovation, the digital payment system, and the integration of Bangladesh’s economy with the global economy. As Bangladesh’s economy is strongly growing and equally integrating with the worldwide economy, the financial market has been developing and becoming more complex. In this context, a forward-looking strategy and an interest rate targeting monetary policy would be more effective for ensuring macroeconomic stability and promoting financial development. Therefore, BB adopted the interest rate targeting monetary policy framework to have an efficient monetary transmission mechanism to support the monetary policy objective of price stability and economic growth trajectory from July 2023 onward.

Policy Measures taken by BB under Modernisation of Monetary Policy

Policy initiatives for operationalisation of Interest Rate Corridor (IRC)

(I) On July 1, 2023 BB introduced a Interest Rate Corridor (IRC) where overnight Repo rate replaced by Policy rate and re-fixed at 6.50 per cent. The upper limit of this IRC is named as Standing Lending Facility (SLF) and replaced Special Repo rate which was re-fixed at 8.50 per cent. Moreover, the lower limit of IRC named as Standing Deposit Facility (SDF) and replaced the Reverse Repo rate which also re-fixed at 4.50 per cent.

(II) On October 5, 2023 BB re-fixed its IRC by increasing all the rates by 75 per cent basis points. After the increase Policy rate, SLF and SDF stand at 7.25 per cent, 9.25 per cent and 5.25 per cent respectively.

(III) On November 26, 2023 BB re-fixed its IRC by increasing all the rates by 50 basis points. After the increase Policy rate, SLF and SDF stand at 7.75 per cent, 9.75 per cent and 5.75 per cent respectively.

(IV) On January 17, 2024, BB re-fixed its IRC by increasing the policy rate by 25 basis points, from 7.75 per cent to 8.00 per cent. At the same time, the band width of the IRC was narrowed from ±200 basis points to ±150 basis points by Reducing SLF rate by 25 basis points from 9.75 per cent to 9.50 per cent, and increasing SDF rate by 75 basis points from 5.75 per cent to 6.50 per cent.

(V) On May 8th, 2024 to tame down the uprising inflation, BB re-fixed its IRC by increasing all the rates by 50 basis points. After the increase Policy rate, SLF and SDF stand at 8.50 per cent, 10.00 per cent and 7.00 per cent respectively.

(VI) On August 25, 2024, following the Monetary Policy Committee‘s decision to continue raising the policy rate until inflation reaches the desired level, BB increased all IRC rates by another 50 basis points. After the increase Policy rate, SLF and SDF stand at 9.00 per cent, 10.50 per cent and 7.50 per cent respectively.

(VII) On September 24, 2024, BB further re-fixed its IRC by increasing all rates by 50 basis points. After the increase Policy rate, SLF and SDF stand at 9.50 per cent, 11.00 per cent and 8.00 per cent respectively.

(VIII) On October 22, 2024, BB re-fixed its IRC once again, raising all rates by 50 basis points. After the increase Policy rate, SLF and SDF stand at 10.00 per cent, 11.50 per cent and 8.50 per cent respectively.

(IX) Finally, on March 4, 2025, to provide liquidity flexibility and financial support to all scheduled banks (including Islamic banks), BB reduced the daily Cash Reserve Requirement (CRR) by 50 basis points, from 3.50 per cent to 3.00 per cent, while keeping the bi-weekly average CRR unchanged at 4.00 per cent.

Policy initiatives for streamlining Open Market Operations (OMOs)

(I) Since August 2023, BB has provided unrestricted access to the Standing Deposit Facility (SDF) and Standing Lending Facility (SLF) along with the full allotment of the repo facility for all banks and non-bank financial institutions based on their demand.

(II) Since July 2024, BB introduced Central Bank Repo auctions twice a week, on Mondays and Wednesdays (or the next working day in case of a holiday), replacing the previous practice of daily auctions, while the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF) remained available daily at prevailing rates.

(III) To enhance the effectiveness of monetary policy transmission within the framework of the Interest Rate Corridor (IRC) of monetary policy of BB, the following structural reforms in Open Market Operations (OMOs) has been implemented:

Starting from November 1, 2024, the practice of conducting repo auctions twice a week has been replaced with a single weekly auction (7 days, 14 days, and 28 days) held once a week, on Tuesdays. If Tuesday is a holiday, the auction will be rescheduled to the next working day.
The Reserve Maintenance Period (RMP) for Cash Reserve Requirement (CRR) has been aligned with a one-week maintenance cycle to synchronise with OMO operations. To eliminate liquidity crunch on RMP it has been decided to introduce fine tuning overnight OMOs.
It was assured that the SLF and SDF available on a daily basis to support liquidity management in line with the IRC framework.
(IV) To sterilise the additional liquidity injected through Lender of Last Resort to ailing banks, BB introduced 90-day and 180-day BB Bill operations along with existing 7-day, 14-day, and 30-day BB Bills from November 2024.

(V) To enhance the monetary policy framework and strengthen liquidity management, the daily minimum Cash Reserve Ratio (CRR) has been reduced from 3.5 per cent to 3.0 per cent, effective March 5, 2025. The bi-weekly average CRR requirement remains unchanged at 4.0.

(VI) To eliminate the interest rate differential in term repos, it has been decided to conduct all term repo auctions at the policy repo rate. This decision has been implemented from 09th March 2025.

(VII) To further enhance the efficiency of the interbank money market and strengthen liquidity management, it has been decided to discontinue all repo operations except the 7-days and overnight tenors. In this regard, the 28-day repo facility has been discontinued with effective from April 10, 2025, and the 14-day repo facility will be phased out from July 2025.

Forward-looking OMOS streamlining

Assured Liquidity Support (ALS) facility is proposed to be discontinued effective June 2025.

Intra-Day Liquidity Facility (IDLF) will be introduced shortly to support smooth settlement of OMOs.

Assured Repo (AR) operations against special-purpose treasury bonds, as well as capital market repo operations, are planned to be phased out in the near future.

Policy Initiatives to stabilise the foreign exchange market

(I) Bangladesh adopted fixed exchange rate regime since its independence and continued until May 30, 2003 with occasional adjustment to maintain export competitiveness.

(II) Effective from May 31, 2003 Bangladesh floated its exchange rate and followed a market based exchange rate for Taka. Under this arrangement, exchange rate was determined on the basis of demand and supply of the respective currencies.

(III) For avoiding unusual volatility in the exchange rate Bangladesh Bank may purchase and sell US Dollar as and when it deems necessary to maintain stability in the foreign exchange market.

(IV) Up until April 2022, the Bangladesh Taka (BDT) maintained a stable rate of 86.45 BDT/USD, reflecting Bangladesh Bank‘s active intervention.

(V) During the height of the pandemic, BB frequently sold foreign currency to stabilise the Taka. Over FY22, FY23, and FY24, BB‘s net sales of foreign currency totalled US$ 7.4 billion, US$ 13.4 billion, and US$ 9.4 billion, respectively, showing increased intervention to support the currency. However, this intervention contributed to a depletion of foreign reserves, prompting Bangladesh to adopt a gradual depreciation strategy.

(VI) Recognising the un-sustainability of an overvalued BDT, BB allowed gradual depreciation, which amounted to 9.3 per cent in FY22, 11.84 per cent in FY23, and 10.14 per cent in FY24.

(VII) In order to bring more flexibility in the foreign exchange market, BB implemented a crawling peg system on May 8, 2024. This interim arrangement was anchored to a currency basket with a mid-rate aligned with the Real Effective Exchange Rate (REER) Index. Under this system, the Crawling Peg Mid Rate (CPMR) was set at Tk. 117.00 per US dollar and allowed market participants to trade around this mid-rate.

(VIII) Following the introduction of the Crawling Peg Exchange Rate System, Bangladesh Bank implemented a ±1 Taka band around the Crawling Peg Mid-Rate (CPMR) (BDT 117/USD), effective from May 9, 2024. It allowed interbank foreign exchange transactions within a defined range, facilitating a gradual market adjustment to the new regime.

(IX) Following the initial implementation of a ±1 Taka band around the Crawling Peg Mid-Rate (CPMR) (BDT 117/USD) on May 9, 2024, BB further widened the band to ±2.5 per cent, effective from August 19, 2024. The widening of the band was aimed at enhancing the efficiency of the foreign exchange market, reducing distortions, and supporting the transition to a more marketoriented exchange rate regime.

(X) On December 30, 2024, the Governor of Bangladesh Bank announced an upward revision of the Crawling Peg Mid-Rate (CPMR) from BDT 117/USD to BDT 119/USD, effective January 1, 2025. The band of ±2.5 per cent around the CPMR was remained unchanged.

(XI) In order to enhance market-driven foreign exchange operations, BB allowed authorised dealers (ADs) to freely negotiate foreign exchange rates with customers and other dealers, ensuring greater flexibility in currency transactions since December 31, 2024.

(XII) BB started to publish a daily reference benchmark exchange rate from January 12, 2025, which was calculated as the weighted average of freely quoted exchange rates from market transactions.

(XIII) On February 9, 2025, BB decided that spot exchange rates may vary from transaction to transaction in a business day, subject to movement within the prescribed band of the crawling peg mid rate, as guided by BB from time to time.

To bring wider flexibility in exchange rate management, it has been decided to repeal the previous circular in which it was instructed that Authorised Dealers (ADs) may apply a maximum of One Taka as spread between buying and selling foreign currencies as well as to maintain uniformity irrespective of the size for all buying and selling transactions of a business day. Accordingly, FE Circular No. 38 dated 31 December 2024 was made operational which allowed ADs to purchase and sell foreign currencies from/to their customers and other dealers at freely negotiated rates.

Dr Md Omor Faruq, Additional Director, and Mr Mahmud Salahuddin Naser,

Director, Monetary Policy Department; Dr Md Ezazul Islam, Executive

Director, Bangladesh Bank.

The piece is originally published as a policy note in the

Monetary Policy Review 2024-25. www.bb.org​

 

[Saif]

https://thefinancialexpress.com.bd/economy/policy-rate-remains-unchanged-at-10pc-to-help-check-prices

BB unveils half-yearly MPS
Policy rate remains unchanged at 10pc to help check prices
Cost of funds remains as high as before thru H1/FY26

FE Report
Published :
Jul 31, 2025 23:54
Updated :
Jul 31, 2025 23:54

Bangladesh's tightfisted monetary-policy stance to continue with 10-percent policy rate until inflation drops below 7.0 per cent, the central bank announced Thursday.

During the rollout of the half-yearly monetary policy for the current fiscal year, Bangladesh Bank (BB) Governor Dr Ahsan H. Mansur said the 'tight' monetary-policy stance would continue unless the inflation is tamed down this bottom line by the end of December next.

In instant reaction, leading trade bodies in the country noted with concern that continued contractionary monetary policy would continue to dampen private investment and hurt business confidence as cost of funds remains as high as before.

Explaining the monetary policy statement (MPS) for the first half (H1) of the financial year 2025-26 at the BB headquarters, Mr Mansur said the inflationary pressure continued to fall in recent months due to the conservative monetary approach but the inflation-combat target has yet to be reached.

Under the circumstances and taking into account the global risks, he said, the BB will continue with its tight monetary policy in the first half of FY'26 to tame inflation and anchor inflation expectations.

"If the inflation rate continues to decelerate further, as we expect, the policy repo rate may be adjusted downward, if inflation rate comes below 7.0 per cent, until then, the policy repo rate will remain unchanged at 10.0 per cent," he said.

Under the unchanged monetary stance, the Standing Lending Facility (SLF) rate will remain at 11.5 per cent while the Standing Deposit Facility (SDF) rate will be 8.0 per cent.

In the latest MPS, the projection of private-sector-credit growth is lowered to 7.20 per cent until December from last June's projection of 9.80 per cent.

The central bank has pinpointed some major challenges confronting the economy-like persistently high inflation, a depreciating exchange rate, depleting foreign-exchange reserves, a buildup of external-payment arrears, tight liquidity conditions, a lack of good governance, and elevated non-performing loans (NPLs).

In response, the banking regulator has outlined clear and forward-looking strategies emphasising its strong commitment to containing inflation, stabilising the exchange rate, rebuilding foreign-exchange reserves, and restoring confidence in the banking sector through improved governance.

"Once current developments and projections consistently show a decline in inflation and the policy rate in real terms reach 3.0 per cent, BB will gradually begin to lower the policy rate," says the governor.

Asked whether the central bank is sacrificing economic growth and employment generation through a repeat of contractionary monetary, the BB governor said macroeconomic stability is a precondition for a sustainable economic growth.

Keeping this in mind, he said, the central bank has been focusing on improving the country's macroeconomic situation. Despite the approach, the country maintained over 4.0-percent economic growth, which is "perfect under the current macroeconomic context".

"We can still achieve artificially lucrative growth by injecting high-powered money like in the previous regime, which will not sustain," the former IMF-executive-turned governor under the post-uprising government told the reporters.

The banking regulator has raised the policy rate, through which the commercial banks borrowed funds from the central bank, 11 times since May 2022.

It lifted the rate to 10 per cent in October last year and continued the policy stance despite criticism from the business circles because it significantly enhanced their cost of borrowings amid persisting economic slowdown.

Responding to a question, the governor said the central bank will intervene in some 15 to 20 troubled banks in the coming days in phases.

"We are already taking steps regarding Bangladesh Commerce Bank Limited," Dr Mansur said, adding that Padma Bank is also under close observation. "Padma Bank is now almost non-functional. It needs to be made functional. It can also be merged. This will be addressed in the second phase."

In the first phase, BB plans to intervene in five banks. In the second, Padma Bank will be included along with five to ten additional banks.

"We will proceed phase by phase, depending on our capacity," the governor notes about possible mergers and acquisitions.

However, money-market experts raised question over the nature of tight monetary-policy stance because commercial banks have been allowed intensified volume of liquidity supports from the central bank in recent months.

According to BB statistics, commercial lenders borrowed Tk 1.45 trillion under the central bank repo facility alone in June last. Simultaneously, the banks received special liquidity supports amounting to Tk 817 billion in the same month.

Former lead economist of World Bank's Dhaka office Dr Zahid Hussain says the central bank probably wants to avoid possible risks of inflation buildups in the days ahead. That's why it does not take risks of squeezing policy rate.

He thinks the country got an opportunity to lessen the inflationary burden when the exchange rate was falling couple of weeks ago, but the central bank did not cash in on the opportunity and upped the dollar price through direct intervention.

Under the intervention, he says, the BB injected a good volume of liquidity through purchasing US dollars from the market. "These funds may create a fresh risk to raise inflation if the regulator does not mop up the liquidity immediately."

"I think the BB takes the right decision under the current macroeconomic context," the economist told The Financial Express.

Dr M. Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, thinks the BB needs to continue conservative monetary stance for another round to keep under control the higher inflationary pressure.

But it will not be sufficient if the stability in exchange rate and improvement in balance of payments are not continued in the coming days. "Otherwise, it may trigger inflationary pressure again through creating depreciation of local currency further."

About the BB liquidity feeding, he says the central bank continues providing the support because financial health of some banks is not in good shape but the injected liquidity needs to be sterilised as quickly as possible to avert possible push in inflation.

"But, the BB has to reach a logical solution to the struggling banks through consolidation, mergers and acquisitions," he told the FE.​

 

[Saif]

BB continues tight monetary policy stance for 1st half of FY26

Bangladesh Bank (BB) has maintained its tight monetary policy stance for the first half of the current fiscal year 2025-26 (H1FY26) to contain inflation and anchor inflation expectations. "BB will continue its tight monetary policy stance in the first half of FY26 to contain inflation and anch

thefinancialexpress.com.bd

BB continues tight monetary policy stance for 1st half of FY26

Published :
Jul 31, 2025 16:22
Updated :
Jul 31, 2025 17:25

Bangladesh Bank (BB) has maintained its tight monetary policy stance for the first half of the current fiscal year 2025-26 (H1FY26) to contain inflation and anchor inflation expectations.

"BB will continue its tight monetary policy stance in the first half of FY26 to contain inflation and anchor inflation expectations. If the inflation rate continues to decelerate further, as we expect, the policy repo rate may be adjusted downward, if inflation rate comes below 7% until then the policy repo rate will remain unchanged at 10.0 percent, the Standing Lending Facility (SLF) rate will remain at 11.5 percent, and the Standing Deposit Facility (SDF) rate will be 8.0 percent," said BB Governor Dr Ahsan H Mansur, BSS reports.

He said this while announcing the monetary policy for the first half of the fiscal FY26 at a press conference at the central bank headquarters in the city today (Thursday).

In his speech, the Ahsan H Mansur said the primary aims of this MPS are to decelerate the rate of inflation further while maintaining exchange rate stability and strengthening financial stability.

"Global economic growth is expected to weaken due to increased trade tensions and heightened policy uncertainty. The recent rise in tariffs by the U.S. administration and the associated uncertainties pose risks to exports, disruptions to global supply chains, and intensify financial market turbulence," he added.

Moreover, he said, global inflation is expected to ease due to weakening demand, currency volatility, and declining hydrocarbon prices.

Therefore, central banks around the world may be more inclined to reduce interest rates or keep them steady at current low levels, given the dual context of weaker growth and lower inflation, he added.

Meanwhile, he said, world commodity prices are expected to decline in 2025 and 2026.

The BB governor said that the central bank will continuously monitor inflation trends and the liquidity situation in the domestic market.

"Once current developments and projections consistently show a decline in inflation and the policy rate in real terms reaches 3.0 percent, BB will gradually begin to lower the policy rate. Moreover, if exports weaken due to tariff shocks and the weaker global growth outlook, accompanied by depreciation pressures, BB will adjust the policy rate as needed to cushion the short-term impact while safely guiding its inflation objectives," he added..

Mansur, however, said that the economy was confronted with significant macroeconomic challenges when the current interim government assumed office in August 2024.

"The major challenges included persistently high inflation, a depreciating exchange rate, depleting foreign exchange reserves, a buildup of external payment arrears, tight liquidity conditions, a lack of good governance, and elevated non-performing loans (NPLs)," he added.

In response, he said, BB has outlined clear and forward-looking strategies emphasizing its strong commitment to containing inflation, stabilizing the exchange rate, rebuilding foreign exchange reserves, and restoring confidence in the banking sector through improved governance.

To fulfill its commitment, he mentioned, BB has maintained a tight monetary policy stance and adopted a fully flexible market-based exchange rate regime.

BB also initiated a wide range of reform programs targeting the banking sector, he said.

Ahsan H Mansur said headline inflation (p-t-p) has gradually eased in response to the coordinated demand and supply-side measures adopted by the respective authorities.

"Exchange rate stability has been achieved due to a substantial improvement in the BoP, which contained the pass-through effect of imported inflation," he added.

He opined that BB's initiatives towards implementing a fully flexible exchange rate regime have also contributed to rebuilding foreign exchange reserves.

Furthermore, he said, accountability and good governance in the banking sector are gradually being restored, depositor confidence has improved, and the liquidity situation has slowly eased.

These positive developments resulted from a wide range of administrative measures and reform programs initiated in the banking sector, he added.

Mansur, however, said that BB has aligned its policies with the government's budgetary targets of achieving 5.5 percent GDP growth and containing inflation within the 6.5 percent ceiling for FY26.

Regarding exchange rate, he said, BB moved towards a more flexible exchange rate regime in May 2025, aiming to enhance stability in the foreign exchange market.

"This flexible exchange rate regime remains crucial for achieving smoother adjustments to external imbalances, easing foreign exchange market pressures, and preserving foreign reserves," he said.

He also mentioned BB recognizes that allowing greater exchange rate flexibility is an important policy initiative to compensate for the impact of reduced demand of exports amid escalating trade tariffs.

"To closely monitor the foreign exchange market, BB publishes a reference exchange rate twice a day, which serves as a benchmark for price discovery in the market," he added.

In this regard, he said, consistent with the flexible exchange regime and to rebuild foreign exchange reserves, BB will intervene in the foreign exchange market to curb volatility in the exchange rate and ensure greater stability in the foreign exchange market.

BB's commitment to maintaining a flexible exchange rate regime aims to ensure stability in the exchange rate and build up foreign reserves, thereby helping to mitigate external shocks, he added.

To address the rising non-performing loans (NPLs), Mansur said, BB has launched significant reform initiatives to avoid a crisis and ensure long-term economic stability.

"The effective implementation of ongoing initiatives, coupled with forthcoming measures and the development of robust resolutions for distressed banks based on AQR findings, will position BB to restore good governance practices and bolster stakeholder confidence in the banking system. Additionally, BB will roll out the risk-based supervision (RBS) of banks starting from January 2026, aiming to usher in qualitative changes in how banks are monitored and regulated," he added.​

 

[Saif]

Bangladesh's capital market and banking sector need simultaneous reforms

Bangladesh's economic progress is at risk due to a weak banking sector and the absence of a functioning capital market. The banking sector is the weakest link in Bangladesh's economy. Despite the strength and competitiveness of the overall economy, banks have long posed serious risks. A review of

thefinancialexpress.com.bd

Bangladesh's capital market and banking sector need simultaneous reforms

Bidyut Kumar Saha
Published :
Aug 05, 2025 23:33
Updated :
Aug 05, 2025 23:33

Bangladesh's economic progress is at risk due to a weak banking sector and the absence of a functioning capital market.

The banking sector is the weakest link in Bangladesh's economy. Despite the strength and competitiveness of the overall economy, banks have long posed serious risks.

A review of bank asset quality is underway and expected to expose the extent of damage in several stressed banks. It may also reveal the economic burden ahead.

While reforms are ongoing, they focus mainly on the banking sector, with inadequate attention to capital markets. In a balanced financial system, banks, bond markets, and stock markets play complementary roles.

The poor state of the banking sector is tied to the absence of a functional capital market-critical for long-term financial stability. Capital markets fund long-term assets, while banks, with short-maturity deposits, should finance working capital and daily transactions, which is essential for the sector's stability.

Banks are currently making long-term loans for fixed assets. In doing so, they have supported industrial development and mortgage lending-but at great cost. This structural mismatch threatens growth and economic stability.

A functional capital market would channel long-term funds from life insurers and other sources into productive investments. Yet Bangladesh's life insurance sector is poorly governed and small relative to the overall economy.

About a quarter of its funds go into short-term deposits and real estate-an unacceptable waste of long-term capital. These investments inflate land prices, harming industrial and infrastructure development.

Lacking a bond market, insurers have few long-term investment options. Bangladesh seeks foreign direct investment, but squanders its own billion-dollar life insurance funds due to a missing bond market. This contradiction undermines the economy.

Countries like Indonesia, Malaysia, and India invest a large share of life insurance funds in long-term bonds, financing infrastructure, housing, and industry. This is possible because they have functioning corporate bond markets-unlike Bangladesh.

Bangladesh is a top country for receiving inward remittances, one-fourth of which goes to the real estate sector challenging industrialization efforts. Inward remittances can have a positive impact on long-term investments if there are functional bond and equity markets.

A transparent capital market is also a prerequisite to introducing much-needed derivative instruments for mitigating risks for businesses and the economy.

In Bangladesh, banks issue corporate bonds mainly to raise Tier-II capital through reciprocal deals with other banks, offering little benefit to the bond market or banking stability.

Affordable housing is a national priority. A healthy mortgage finance market can turn housing expenses into investment, boosting household wealth. In Bangladesh, housing costs consume large portions of household income. With a mortgage bond market, these costs could become wealth-building investments.

A sustainable housing finance sector requires a national mortgage warehouse to refinance loans from banks and financial institutions. This warehouse could also issue mortgage-backed securities through securitization-a tool that reduces asset-liability mismatches and improves liquidity.

Beyond housing, securitisation could attract domestic and foreign capital to priority sectors like infrastructure and industry.

Capital market reforms should include drafting securitization rules and establishing a mortgage warehouse-steps already taken in Malaysia, Indonesia, and India.

Development finance institutions can help by drafting rules, supporting new institutions, taking equity stakes, improving governance, and transferring technology.

Global capital is available. Bangladesh needs investment vehicles and instruments that match the diverse appetites of investors in its private sector-led economy.

The writer is Lead Investment Officer, Asian Development Bank (ADB) Bangladesh Resident Mission.​

 

[Saif]

Fast-tracking credit to performing businesses

In today's challenging economic landscape, access to timely and appropriate credit has become a critical factor for survival and growth. Yet, in Bangladesh, many fundamentally sound businesses are being denied financing due to a structural rigidity in our credit classification system, one that fail

thefinancialexpress.com.bd

Fast-tracking credit to performing businesses
It is necessary to support growth, reduce NPLs

Syed Md Aminul Karim and Md Ariful Islam
Published :
Aug 08, 2025 22:21
Updated :
Aug 08, 2025 22:21

In today's challenging economic landscape, access to timely and appropriate credit has become a critical factor for survival and growth. Yet, in Bangladesh, many fundamentally sound businesses are being denied financing due to a structural rigidity in our credit classification system, one that fails to distinguish between a failing company and its flourishing sister concerns within the same group.

Although Bangladesh Bank's BRPD Circular No. 07 (April 2024) was a welcome policy shift, permitting loans to performing concerns within a group even if another entity is classified, provided the default is not willful and certain conditions are met. The process it mandates remains cumbersome, lengthy, and underutilised. This bureaucratic complexity discourages banks from using the provision. As a result, banks hesitate to proceed, businesses are denied timely credit, and the country loses valuable momentum in industrial recovery and job creation.

THE REAL PROBLEM: ONE BLACK MARK, MANY VICTIMS: The current credit assessment model in Bangladesh still operates on a group-based classification, which means if one company in a corporate group becomes classified, all other sister concerns-regardless of their individual performance-are often treated as high-risk or ineligible for financing.

This system not only restricts liquidity to viable businesses but also creates a vicious cycle: promising enterprises are choked off from working capital, which ultimately pushes them toward distress-adding further to the country's ballooning non-performing loan (NPL) portfolio.

RECENT ICRR CHANGES MAY INTENSIFY PRESSURE: Bangladesh Bank has not extended the relaxed Internal Credit Risk Rating (ICRR) guidelines beyond December 2024. While these relaxed standards had helped businesses qualify for credit during tough times, the return to the stricter scoring model from January 2025 will further narrow borrower eligibility. This dual pressure-from group-based CIB constraints and tightened credit risk ratings-is likely to slow credit growth, increase rejection rates, and may raise NPLs as financially strained but viable firms are pushed into default. Bangladesh Bank should consider extending the ICRR flexibility until the economy gains momentum and stabilizes.

WHAT WE CAN LEARN FROM THE WORLD: Globally, countries like India, Malaysia, the Philippines, South Africa, Nigeria, and even Nepal are evolving towards entity-based credit assessment models. These allow banks to evaluate and lend to businesses based on their own financial strength, rather than group association alone-unless legal or financial guarantees directly tie them to a defaulter.

In contrast, Bangladesh remains one of the few countries where central bank approval is mandatory to lend to a performing concern within a group that has a defaulting member. While this ensures control, it causes serious delays and discourages lending-even when there is low risk.

A SMARTER FRAMEWORK: FASTER LENDING WITH ACCOUNTABILITY: What is needed now is a fast-track lending framework-one that allows banks to lend to low-risk, well-performing group concerns without waiting for BB approval, subject to strict safeguards:

Risk-Based Segmentation: Classify performing group concerns as Green (low risk), Amber (moderate), or Red (high risk).

Bank-Level Autonomy: Let banks approve Green-category loans up to a threshold (e.g., BDT 50 crore) with post-disclosure to BB, not prior approval.

Enhanced Monitoring: Require banks to impose strict end-use covenants, utilize digital fund tracking, and conduct quarterly reviews.

Digital Portal for BB-Bank Communication: Create an e-approval system for BB review and oversight, reducing paperwork and delay.

Incentives and Penalties: Encourage ethical lending by rewarding compliant banks and penalizing misuse or negligence.

ETHICS AND REALITY: BRIDGING THE TRUST GAP: It is true that ethical business practices in Bangladesh are still evolving, and concerns over fund diversion are legitimate. But a blanket restriction on all group-linked financing does not solve the problem-it merely punishes genuine entrepreneurs while leaving loopholes for habitual defaulters.

If performing business owners-those who create jobs, export goods, and build industries-are not supported now, the long-term cost to the economy will be far greater than any single bad loan.

Bangladesh Bank must lead this transformation by adopting a balanced approach that enables trust, enforces discipline, and supports growth.

To reduce NPLs, accelerate industrial recovery, and rebuild credit confidence, Bangladesh must shift from bureaucratic control to smart regulation. A well-designed, risk-based fast-track lending framework-alongside thoughtful ICRR flexibility-can deliver both credit discipline and credit access.

Now is the time for reform that works in practice, not just on paper. Let us empower banks to lend responsibly and enable performing businesses to thrive again.

Dr. Md Ariful Islam is a banker and economic researcher. Dr. Syed Md Aminul Karim is a former Member of the National Board of Revenue (NBR)​

 

[Saif]

Bangladesh’s banking sector pulled back from the brink: BB governor

Bangladesh’s banking sector has managed to pull back from the brink over the past year, Bangladesh Bank Governor Ahsan H Mansur said on Sunday, crediting a series of measures taken since he assumed office. Speaking at a seminar titled 'Interim Government’s 365 Days' organised by Centre

thefinancialexpress.com.bd

Bangladesh’s banking sector pulled back from the brink: BB governor

UNB
Published :
Aug 10, 2025 12:51
Updated :
Aug 10, 2025 12:51

Bangladesh’s banking sector has managed to pull back from the brink over the past year, Bangladesh Bank Governor Ahsan H Mansur said on Sunday, crediting a series of measures taken since he assumed office.

Speaking at a seminar titled 'Interim Government’s 365 Days' organised by Centre for Policy Dialogue (CPD), the governor said the sector was “right at the edge of the cliff” when the interim government took office in August last year.

“Our two main challenges were to stabilise the macroeconomy and reform the financial sector. Reforms cannot be done in a year, but we have started them in every area,” Mansur said.

Upon taking charge, he held meetings with international financial institutions to maintain lines of credit.

“We assured them that we would repay every penny we owed, and we did. Our situation did not turn like Sri Lanka or Pakistan,” he said.

According to him, the biggest support in debt repayment came from remittance inflows alongside export earnings over the past year.

On inflation, the governor said controlling it was a major challenge.

Since August 14 last year, Bangladesh Bank has not sold a single dollar from reserves, instead buying dollars at Tk 122 despite pressures to adjust the rate.

Inflation has since fallen below 10%, and Mansur expects it to drop below 5% in the future.

While the balance of payments is now in surplus, the economy is still lagging in attracting investments, he noted.

“Before elections, big investors will not come, but we have already prepared the ground to encourage investment after the polls,” he added.

On why no banking commission was formed, Mansur said it would have delayed urgent decisions, taking six to nine months to produce a report. Instead, three separate taskforces have been formed to reform the banking sector, central bank operations, and recover laundered money.

Recovering funds siphoned abroad is proving the most challenging, he said, as it requires coordination with 8–10 ministries.

Major legal reforms are also underway, including extensive amendments to the Bank Companies Act, fundamental changes to the Money Laundering Act — adding asset recovery provisions — and broad revisions to the Bangladesh Bank Order to enhance the central bank’s accountability and autonomy.

Amendments will also be made to the Deposit Insurance Act and the Money Loan Court Act to resolve long-pending loan default cases.

The central bank also plans to amend the Bangladesh Bank Resolution Ordinance to allow it to acquire any bank facing liquidity crises due to irregularities. “No more leniency. If a bank cannot operate properly, Bangladesh Bank will take it over,” Mansur warned.

He added that a single body will be created for “360-degree monitoring” of all banks to tackle irregularities in a coordinated manner.

The governor further stressed initiatives to make Bangladesh a cashless economy, including the promotion of QR codes, wider credit card usage, expansion of nano-loans, banking education for school students, Tk 200 student bank accounts, housing reforms, revenue department restructuring, and lowering smartphone prices to expand digital banking coverage.​

 

[Saif]

Discriminatory bank financing in Bangladesh

Who does not aspire after a discrimination-free economy or society? Restoring rights inevitably requires a movement. Since inception of collective right-consciousness , the victims have fought against rights violation. From time to time, agitati

thefinancialexpress.com.bd

Discriminatory bank financing in Bangladesh

Haradhan Sarker
Published :
Aug 12, 2025 22:56
Updated :
Aug 12, 2025 22:56

Who does not aspire after a discrimination-free economy or society? Restoring rights inevitably requires a movement. Since inception of collective right-consciousness , the victims have fought against rights violation. From time to time, agitations spring up spontaneously as we observed an anti-discrimination student movement as one of the most powerful catalysts of July Uprising 2024 led by students and masses in Bangladesh. Discrimination has numerous types and forms -- political, economic, religious, racial, ethnic, gender, administrative, and so on. Many discriminations remain disguised and generally subtle. New and unimaginable forms of discrimination also emerge. However, we should unveil every possible type of discrimination lying in every stage of society and economy. Present discussion would be concerned with a type of economic discriminations particularly in loans and advances disbursed by the banks in Bangladesh.

Discrimination in the field of economic management leads to a rise in economic inequalities. Banks have a critical role in facilitating economic growth in terms of income and wealth of their borrowers. In the context of increasing emphasis upon corporate social responsibility (CSR) , banks as lenders should prioritise the interest of the majority of borrowing people belonging to cottage, micro, small and medium categories rather than large ones. This approach to lending is ethical and beneficial not only for the economy but also for the lending banks.

Disbursement and recovery of loans and advances constitute one of the most important functions of a bank. The cruel fact is that large firms or borrowers managed to reap most of the facilities offered under government stimulus packages during COVID period whereas the people and firms under CMSME categories were deprived of their due and justified benefits. An unholy nexus of bank owners-directors, government policy-makers and the then ruling politicians forced discriminatory banking .

Discrimination is a man-made injustice. It may be created intentionally, unintentionally and also unconsciously. Whatever be the manner of creating or continuing discrimination, it is always unacceptable and subject to elimination. It is also true that eliminating discrimination hardly occurs without a strong movement. Longstanding discrimination often becomes a custom that is silently accepted as a fate . Resistance to change such fate comes from the beneficiary group. Thus it is an ethical as well a great challenge as to whether and how to end discrimination.

According to information obtained from BB's Scheduled Banks Statistics (January-March 2025), Table 1 reveals that as the primary sector contributing 10.94 per cent of gross domestic product (GDP), agriculture, fishing & forestry receives only 4.18 per cent of total bank loans and advances .This is quite inadequate against the sector's actual requirements. Besides, the share of finance held by farm borrowers of more than Tk 1 crore to 50 crore and above is 1.16 per cent. As a result, the actual percentage for farmers below the loan size of Tk. 5000 to 1 crore reduces to 3.02 (i.e. 4.18 per cent minus 1.16 per cent). Most of the farm households have to depend on informal fund to the extent of more than 90 per cent of their needs at a much higher cost . Borrowers under cottage and SME categories receive only 5.52 per cent of total loans and advances. Available data on banking finance are not well designed. So, the real position of CMSME financing cannot be analysed and justified in specific terms. We are totally unaware of any updated and inclusive statistics on financing CMSMEs along with the number of entrepreneurs/borrowers based on their nature and size. Consequently, categorical financing needs and priorities cannot be ascertained. An attempt has been made to present some past statistics about size-based economic establishments, and farm households which are to be assessed as preferential entities.

This Table furnishes data from which we can guess a rough scenario regarding the number of probable finance-seeking people and organizations that largely belong to CMSME categories. It is seen from the table that more than 78 lac CMSME establishments are recorded. Their actual number might have rather escalated over the time span of 12 years from 2013. Regrettably, we fail to collect the current number of borrowing accounts and other relevant data under CMSME .The number of accounts under agriculture, fishing and forestry are 63.35 lac against 1.69 crore of farm households. Only 37.49 per cent of farm households have been financed with very insignificant amounts.

Table 3 shows that the banking industry has more than 13 million accounts for loans and advances. We cannot directly conclude that the number of borrowers would be exactly equal to the number of accounts. Due to having more than one accounts maintained by many borrowers, the actual number of borrowers may be around 10 million. Whatever be the real number, 99.66 per cent account holders have access to only 37.19 per cent of total loans and advances while only 0.34 per cent account holders share 62.81 per cent of total loans and advances. Economic activities create income and wealth usually to the extent of investment outlay made by the investors. Household Income and Expenditure Surveys 2016 and 2022 reveal that investible surplus of the majority of households is insignificant. That is why, they need debt financing. CMSMEs' inaccessibility to and inadequacy of debt fund is triggered by discriminatory allocation of banks' loans and advances. Awfully it is observed that average size of loans and advances taken by few account holders ( only 45,360) is 499.23 times the average size of borrowing by more than 13.39 million account holders. Are the lending banks liable for such a discrimination ? It is primarily the lack of clear philosophy and principle of good governance at the national level and secondarily the lack of good corporate governance at the level of lending banks.

Hard truth is that we are yet to develop the appropriate framework of good governance to be implemented by the government . Most important at this critical juncture of time is that there must be a broad-based political consensus particularly on the fundamental philosophy and principles that would underpin the foundation of good governance system for our country. As a sub-system, the model of corporate governance in banking will have to be developed. Corporate stakeholder responsibility should be preferred over corporate social responsibility in order to meet expectations of all organic stakeholders of the banking industry. Then, discriminatory banking will end as an in-built component of stakeholders-based banking governance.

Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired Professor of Management.​

 

[Saif]

Forex robust, bank liquidity eases

Bangladesh Bank intervention to bring stability in foreign-exchange market proves a boon for both -- the central bank builds up forex stock and commercial banks quench their liquidity thirst in trying times. In a latest intervention made Sunday, the BB purchased $83 million from eleven commercial

thefinancialexpress.com.bd

BB INTERVENTIONS WORK BOTH WAYS
Forex robust, bank liquidity eases

JUBAIR HASAN
Published :
Aug 12, 2025 10:25
Updated :
Aug 12, 2025 10:25

Bangladesh Bank intervention to bring stability in foreign-exchange market proves a boon for both -- the central bank builds up forex stock and commercial banks quench their liquidity thirst in trying times.

In a latest intervention made Sunday, the BB purchased $83 million from eleven commercial banks at rates ranging from Tk 121.47 and Tk 121.50 a dollar to stabilise the country's forex market and injected around Tk 10 billion.

The central bank has so far been bought $622 million from the commercial banks since July 13 under the prevailing free-floating exchange regime.

For the dollar buys, the banking regulator paid over Tk 75.57 billion to the banks at a time when commercial lenders largely depend on central bank's lending facility against repo to meet their local-currency obligations amid poor deposit and lending growth.

Apart from forex-market stabilisation, such regular intervention by the banking regulator to keep the exchange rate within the undisclosed band of the crawling-peg system also helps in bolstering the country's foreign-currency reserves.

Seeking anonymity, a BB official said the inflow of foreign currencies continues to grow on back of remarkable growth of remittance and export receipts in recent months while the pressure of import has yet to get momentum, which leaves a good portion of unused foreign currencies in the banks.

As a matter of fact, the official notes, the exchange rate on the interbank spot market falls and moving around the floor rate of the undisclosed band under the existing crawling-peg system.

"That's why the BB continues to intervene and purchase the US dollar from the market," the official said, adding that the BB in the last five biddings bought a total of $622 million from the market.

The central banker mentions that the intervention normally comes to prevent the downfall of taka-dollar exchange rate and to bolster the foreign-currency reserves in line with the prescription of the IMF (International Monetary Fund) under its $5.50-billion lending package to stabilise the country's macroeconomic situation.

According to BB statistics, the gross foreign-exchange reserves rose to $30.25 billion and $25.23 billion in accordance with BB and IMF's BPM6 calculations as on August 10, 2025. The figures were $29.80 billion and $24.78 billion respectively by the end of July last.

Managing Director and Chief Executive Officer of Mutual Trust Bank PLC (MTB) Syed Mahbubur Rahman says the banks managed to get the liquidity through selling the US dollars amid liquidity tightness because of low deposit growth and investment opportunities under the persisting economic sluggishness.

"And the liquidity that comes from the sale of the American greenback also makes contribution to reducing the government borrowing costs from the banks through the continuous fall in the yield on government securities market," the experienced banker explains.

According to the auction of treasury bills, the cut-off yield in 91 days, 182 days and 364 days dropped to 10.19 per cent, 10.39 per cent and 10.49 per cent respectively on Sunday from 10.45 per cent, 10.81 per cent and 10.57 per cent recorded on July 20 last.​

 

[Saif]

BFIU seeks bank records of ex-Bangladesh Bank governors, deputies

BFIU has sought bank account details of three former governors and six former deputy governors of the Bangladesh Bank

en.prothomalo.com

BFIU seeks bank records of ex-Bangladesh Bank governors, deputies

UNB
Published: 13 Aug 2025, 22: 45

Atiur Rahman, Fazle Kabir and Abdur Rouf Talukder

The Bangladesh Financial Intelligence Unit (BFIU) has sought bank account details of three former governors and six former deputy governors of the Bangladesh Bank.

The move comes following a request from the Anti-Corruption Commission (ACC) as part of an investigation into allegations of corruption and mismanagement in the banking sector.

The three former governors are Atiur Rahman, Fazle Kabir and Abdur Rouf Talukder, all of whom served during the 15-and-a-half-year rule of the Awami League government.

The allegations suggest that the country's banking sector was systematically weakened during their tenure.

The six deputy governors whose bank accounts have been subpoenaed are Sitangshu Kumar Sur Chowdhury (SK Sur), Masud Biswas, SM Moniruzzaman, Abu Hena Mohammad Razee Hasan, Kazi Saidur Rahman and Abu Farah Mohammad Naser.

Allegations against former governors

Atiur Rahman's tenure was allegedly marked by a weak regulatory oversight, which is said to have enabled financial scandals such as the Hall-Mark and Basic Bank loan scams.

He is also accused of being a 'mastermind' behind the cover-up of the 2016 Bangladesh Bank reserve heist, an event that ultimately led to his resignation.

During his time as governor, Fazle Kabir allegedly approved the controversial takeover of Islami Bank Bangladesh and Social Islami Bank by the S Alam Group.

According to the information, he allegedly approved these takeovers in the dead of night, paving the way for large-scale looting at the banks.

He is also accused of relaxing loan policies to conceal default loans, keeping interest rates artificially low at 9 per cent and introducing methods for loan defaulters to get off with minimal payments.

Serving as governor for two years, Abdur Rouf Talukder is said to have made numerous controversial decisions. He resigned from a secret location after the fall of the Awami League government.

The report claims that his tenure saw the continuation of fraudulent loan distribution and that he failed to address irregularities, with allegations that he became an accomplice to the businesspeople involved.

He reportedly issued a new policy offering significant concessions to loan defaulters and allegedly had new money printed to provide funds to S Alam Group banks.

According to sources, the three former governors have largely remained out of the public eye since the change in government.

Atiur is believed to have left the country following the fall of the Hasina government, although his passport has been 'blocked' over his alleged link to the reserve heist.

Fazle Kabir is believed to still be in Bangladesh but has not appeared in public, while Abdur Rouf Talukder reportedly went into hiding after 5 August, though he is also thought to remain in the country.

Deputy governors also under scrutiny

Among the former deputy governors, SK Sur Chowdhury and Masud Biswas, the latter a former chief of the BFIU, are now behind bars on charges of amassing wealth beyond their known sources of income.

The report also makes serious allegations against the others, accusing SM Moniruzzaman of halting bank inspections during his tenure; former BFIU chief Razee Hasan of failing to act against money laundering under his watch; Kazi Saidur Rahman of triggering turmoil in the foreign currency market; and Abu Farah Mohammad Naser of crippling the banking sector by excessively relaxing loan policies.​