[🇧🇩] Banking System in Bangladesh

[Saif]

Banking in the 2030s

Banking is going through a rapid global transformation unlike anything seen before. Large international banks are shifting from retail banking to wealth management.

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Banking in the 2030s

Banking is going through a rapid global transformation unlike anything seen before. Large international banks are shifting from retail banking to wealth management. In recent years, large global banks such as Citi and HSBC have exited retail banking in many markets and focused instead on wealth management and private banking in major wealth hubs, including Hong Kong, Singapore, the UAE, the UK and the US.

Their attention is now on clients at the top tier of the wealth pyramid, offering curated services such as wealth and investment advice and legacy planning. These are delivered through experienced bankers and mobile apps. They are also earning higher fee income by acting as sales agents for structured investment products issued by other banks and financial institutions. Although banks hold vast amounts of data on consumer spending patterns, they rarely use this data to offer tailored solutions. This remains a clear opportunity for banks to differentiate themselves by personalising services based on client spending behaviour.

Global banks are also moving into the field of digital currencies. Domestic payments in most countries are already digital to varying degrees. The challenge lies in cross-border payments, which are affected by differing regulations and time zones. Tokenised money could reshape this space, whether through central bank digital currencies, stablecoins, or bank-issued tokenised deposits. This presents an opportunity for our central bank and local banks to work with counterparts abroad to speed up the inflow of remittances.

The UAE recently introduced the "Jisr" platform, bringing together Emirati and Chinese banks to carry out the first cross-border payment between the UAE and China using digital currencies issued by central banks. As the UAE is one of the largest sources of remittances for Bangladesh, this is a significant opportunity. Interlinking instant payment systems across borders, as the UAE has done with China, could transform cross-border transfers.

Global banks are already deploying generative AI and investing in agentic AI. Many banking processes remain highly manual despite years of technology investment. Client onboarding and AML or KYC checks are examples. AI can pre-fill account opening forms, and clients can complete the rest on their device. Connectivity with NID and NBR servers can allow real-time identity verification and automated collection of tax documents.

Credit appraisal and portfolio reviews are also heavily manual. With AI, banks can automate credit scoring for retail and small business clients. Instead of rushing to assess portfolios during adverse or black swan events, banks can use AI to receive early warnings about deteriorating conditions in a client's environment. Another potential area is sales and client relationship management. While many banks use CRM platforms to track clients, AI can enhance this data by identifying cross-selling opportunities and highlighting promising prospective clients.

In future, clients will rely on their own AI agents to engage with banks and support financial and investment decisions. Banks that prepare for these emerging global trends and invest in them now will lead the market in the next decade.

The writer worked as a senior executive at global banks in Bangladesh and Singapore​

 

[Saif]

How banks could facilitate everyone

When Rubel (pseudonym), a small supplier in Gazipur, went to a commercial bank last month to ask for a small loan, the credit officer shook his head. ''We aren't approving any new loan proposal until the bank manages its bad loans,'' the officer said. Rubel is not alone in this. Bangladesh's bankin

thefinancialexpress.com.bd

How banks could facilitate everyone

Mukshadur Rahman
Published :
Dec 10, 2025 23:02
Updated :
Dec 10, 2025 23:02

When Rubel (pseudonym), a small supplier in Gazipur, went to a commercial bank last month to ask for a small loan, the credit officer shook his head. ''We aren't approving any new loan proposal until the bank manages its bad loans,'' the officer said. Rubel is not alone in this. Bangladesh's banking sector, in recent months, has sent the same message to thousands of entrepreneurs throughout the country. In a country where 85 per cent of business financing flows through banking channels, this message has far more serious consequences beyond Rubel's distress. The cost of this grim reality is already visible through shuttered factories, the agony of unpaid workers and the confusion of jittery depositors.

In the country's banking sector, straight forwardness and honesty were systematically discouraged and ignored, while compliance with power rather than prudence was rewarded. Weak governance, coupled with political interference, eventually bends the system and drastically reduces naturally expected outcomes from the economy. Ignoring the social and economic parameters, the previous government focused on inflated accounting figures and remained self-content until they couldn't anymore. That's the danger of it - the more you hide, the worse it becomes. Especially for banks, this is the grim reality.

Skyrocketing non-performing loans (NPLs) have left the banks with strained balance sheets and very limited room for lending, especially to new entrepreneurs. The central bank, however, shows greater courage in making decisions on a scale never seen before. Several private Islamic banks faced an acute liquidity crisis due to poor governance and inadequate monitoring, prompting Bangladesh Bank to step in and consolidate them into a single entity, the Sammilito Islami Bank. However, with a very optimistic outlook, some analysts say that even if everything runs smoothly and a 15 per cent compound annual growth rate (CAGR) is ensured, it will take at least 40 years for the entity to reach break-even, given its colossal bad loans and enormous liabilities. I asked AI for the worst-case scenario, providing all the data I had on the five merged banks. The responses from different AI tools were largely the same. It could take 645 years or more to cover the shortfall.

Apparently, a merger is not a magic wand; it only gathers problems into one container. It is more of a symptom than a cure for the systemic organ failure the economy is facing today. Sammilito Islami Bank will warrant deeper institutional and policy-level reform along with cautious monitoring. Even after that, regaining people's trust will remain challenging for a long time. Then there comes the real question - is it possible to break or at least weaken the chain of corruption, nepotism, and the practice of compromised ethics in the sector?

The Basel framework and other regulatory guidelines have been ignored for years. Minimum capital and liquidity requirements, exposure limit, and mandatory information disclosure have been disregarded. As time elapses, these malpractices and conditions have created a black hole of obvious catastrophe. Although they are the only type of institution that can benefit both borrowers and lenders while still making a profit, they thrive in the market. The beautiful financial alchemy of the banks can surely improve society, uplift overall growth, and ensure sustainability.

The core essence of this alchemy is distributing risk in many baskets rather than concentrating it in one or a few. Small loans can create a large portfolio for banks and reduce risk. However, most of our banks tend to lend money to large corporate parties, as it requires fewer human resources and reduces costs in many other ways. Collecting deposits from millions of ordinary people immediately creates huge liability. Lending the hard-earned income of people to a single or a few parties is simply gambling with people's trust. It's true that large loan disbursement is required for economic development. However, small and medium lending can't be overlooked, as it helps small and medium enterprises flourish and distribute risks among many. It ensures the flow of funds in various sectors, safe and sustainable investment, and regulatory safeguards. In this way, the bank becomes a collective shield where everyone contributes, and everyone benefits. No single entity/person carries the full burden of uncertainty.

In Bangladesh, the aforesaid possibilities fade away amid political affiliation, insider lending, corruption, and nepotism. In banks, boards often represent the sponsor's interests rather than those of depositors. The recent collapse in the banking sector indicates three major flaws, including bad loans, weak oversight, and incentives that encourage risk without consequences, or in simple terms, moral hazard.

However, a ray of hope is emerging on the horizon as the Bangladesh Bank is adopting bold measures and policy-level decisions to rebuild trust and create a banking sector that fosters the nation's growth and prosperity. Before that happens, several non-negotiable things need to be addressed. The central bank should be truly independent. All banks must undergo internationally verifiable audits, and the reports must be published in a timely manner. Depositor's protection should be further strengthened by timely laws and robust policies. SME financing should be expanded, and all banks must comply with regulatory requirements on capital adequacy, liquidity, and sector-wise loan disbursement.

The reform will be difficult, as there will be resistance from the groups that benefit from the current chaos. There will also be legal and policy-level challenges, along with the uncomfortable truth disclosure. However, the slow and painful erosion of credibility in the sector will be far worse. The reform has been started, and it must be continued. Once we get it right, the banks will facilitate everyone - the borrower, the lender, the entrepreneur, the farmer, the dreamer, and, of course, the banking sector itself.

The writer is Management Trainee Officer, Mercantile Bank PLC.​

 

[Saif]

PRI hosts roundtable on baking sector

The Policy Research Institute of Bangladesh (PRI), with support from the Foreign, Commonwealth & Development Office (FCDO), successfully hosted a high-level roundtable discussion today titled "Bank Failures and Resolution Regime: Understanding the Challenges for Bangladesh" at a hotel in the capita

thefinancialexpress.com.bd

PRI hosts roundtable on baking sector

Published :
Dec 11, 2025 18:43
Updated :
Dec 11, 2025 18:43

The Policy Research Institute of Bangladesh (PRI), with support from the Foreign, Commonwealth & Development Office (FCDO), successfully hosted a high-level roundtable discussion today titled "Bank Failures and Resolution Regime: Understanding the Challenges for Bangladesh" at a hotel in the capital.

Lutfey Siddiqi, Special Envoy to the Chief Adviser on International Affairs, attended the event as the chief guest, BSS reports.

Emphasizing the urgency of reform, Lutfey Siddiqi stated, "If the banking sector continues with business as usual, nothing will change. Ensuring good governance-regardless of which political party forms the government-is essential."

A trigger presentation was delivered by Dr. Ashikur Rahman, Principal Economist at PRI, who mentioned, "Passing the Banking Resolution Ordinance is only half the job. What must follow now is a serious investment in the processes, systems, and institutional capacities that will allow Bangladesh Bank and the financial sector to actually implement the resolution regime."

He said without the ability to execute orderly resolutions, manage failing banks efficiently, and protect depositors while minimising systemic risks, the Ordinance will remain a promise on paper.

He also said the real task ahead is building the operational muscle, supervisory tools, valuation expertise, recovery mechanisms, and clear decision protocols that can restore confidence and inject new energy into Bangladesh's financial system, said a press release.

"Only then will the Ordinance achieve its purpose: safeguarding stability and laying the foundation for a stronger, more resilient banking sector," Ashikur added.

Dr. Zaidi Sattar, Chairman of PRI, chaired the event. In his remarks, he said, "The recent rise of non-performing loans to nearly 35 percent is unprecedented... requires careful analytical inquiry into how we arrived at this point,"

He said Bangladesh presents a uniquely challenging context, much like its distinctive trade policy landscape, and therefore demands its own framework for banking sector resolution.

He said the encouraging sign is that the hemorrhage within the sector has stopped, and the banking sector is seeing some light again.

"I'm hoping that the projection about growth of about 5% in the next year is likely to take place. Hope, I'm assuming that we have a nice, free, and fair election in February 2026 that would be a great gift to this nation by the Interim government, I think. And we all look forward to an elected government which also manages economic policy the way we expect it to."

Mohammad Zahir Hussain, Executive Director, Bank Resolution Department, Bangladesh Bank, and Professor Dr. Mohammad Akhtar Hossain, Chief Economist at Bangladesh Bank, attended as special guests.

Dr. Akhtar said, "Our FDI-to-GDP ratio is already very low, and the combination of high NPLs and ongoing political uncertainty is making it extremely difficult to attract foreign direct investment."

The open-floor discussion allowed participants to exchange insights on priority reforms, including the need for legislative updates, strengthened deposit protection mechanisms, and enhanced crisis preparedness.

As part of PRI's ongoing efforts to promote informed policy dialogue, the session brought together policymakers, financial sector experts, business leaders, and development partners to deliberate on the urgent need for a robust and credible bank resolution framework in Bangladesh-a key pillar for ensuring macroeconomic and financial stability in the face of rising vulnerabilities in the banking sector.​