[🇧🇩] Banking System in Bangladesh

[Saif]

Banking must be free from political influence: experts

The banking sector must remain free from political interference and be managed professionally with government support to restore confidence and stability, financial experts said on Thursday.

www.newagebd.net

Banking must be free from political influence: experts
Staff Correspondent 18 December, 2025, 23:31

BB governor Ahsan H Mansur, CPD executive director Fahmida Khatun and MTB managing director Syed Mahbubur Rahman, among others, are present at a discussion titled ‘Banking Sector Reforms: Challenges and Way Forward’ in the capital on Thursday. | Press release photo

The banking sector must remain free from political interference and be managed professionally with government support to restore confidence and stability, financial experts said on Thursday.

They made the remarks at a discussion titled ‘Banking Sector Reforms: Challenges and Way Forward’, organised by the Economic Reporters’ Forum in Dhaka, against the backdrop of mounting loan defaults and deepening governance failures in the financial system.

Speakers stressed that political parties must clearly state their plans for banking sector reform in their election manifestos and remain accountable for those commitments.

While government oversight is necessary to safeguard public interest, they said, politically motivated intervention in bank management has repeatedly undermined discipline and risk management.

Bangladesh Bank governor Ahsan H Mansur called for a firm political consensus to keep banks free from interference.

He said protecting the banking sector from political motives was a moral responsibility of all political parties. Some parties, he noted, have already pledged to strengthen banks and ensure the independence of the central bank, and the country now expects those promises to be implemented in practice.

Mansur emphasised that the financial sector is the backbone of the economy and warned that economic progress would remain fragile unless banking reform receives priority both in election manifestos and post-election policymaking.

He strongly pushed for full autonomy of Bangladesh Bank, arguing that international-standard legislation is needed to shield the governor from political pressure. Removal from office, he said, should only be possible through court rulings based on proven misconduct or corruption.

Centre for Policy Dialogue executive director Fahmida Khatun echoed the governor’s concerns, describing the upcoming national election as a critical turning point.

She said political parties must clearly spell out how they intend to discipline and reform the banking sector.

Past political interference, weak policy enforcement and unchecked lending had pushed the sector to the brink, she said.

According to Fahmida, defaulted loans have now climbed to Tk 6.44 lakh crore, close to the proposed Tk 7.9 lakh crore national budget for 2025–26.

Mutual Trust Bank managing director Syed Mahbubur Rahman said that the crisis intensified after the takeover of Islami Bank in 2017, which opened the door to widespread malpractice.

While recent political changes have brought some improvement, he cautioned that lasting reform will depend on sustained political will rather than technical banking measures alone, he said.

As part of the reform drive, governor Mansur said that all loans exceeding Tk 20 crore would undergo fresh scrutiny.

The reassessment aims to uncover past irregularities and restore discipline in a sector burdened by weak governance and soaring defaults.

He warned that bank officials and directors would be held accountable if such loans lack proper collateral, adding that the central bank would not conceal facts even if the true picture appears alarming.

Defaulted loans, he said, have reached nearly 36 per cent of total disbursements.

Mansur said that the legal process to merge five banks has already been completed.

Within days, the newly formed Sammilito Islami Bank will change logos, signboards and branch names, and overlapping branches will be consolidated or relocated to underserved areas, he added.

Alongside the merger, nine financial institutions will be liquidated.

He assured that general depositors would receive their full funds, while institutional depositors would get partial repayments, and that all deposits of the merged banks would remain safe.

On reserves, the governor said Bangladesh would rebuild foreign

exchange buffers through its own capacity rather than external borrowing, targeting $34–35 billion by the end of the fiscal year through market-based dollar purchases.

Explaining the cancellation of incentive bonuses for bank employees, he said responsibility for failures extends beyond top management, as lending decisions are largely made at branch level, and officials who ignore risks or irregularities will also face consequences.​

 

[Saif]

Bangladesh Bank plans to raise reserves to $35b by year-end: Governor

Within December, non-performing loans also likely to come down, Ahsan H Mansur says at ERF seminar

www.thedailystar.net

Bangladesh Bank plans to raise reserves to $35b by year-end: Governor
Within December, non-performing loans also likely to come down, Ahsan H Mansur says at ERF seminar

The central bank has a plan to raise foreign exchange reserves to $35 billion within this year, Bangladesh Bank Governor Ahsan H Mansur said today.

Bangladesh's foreign exchange reserves stood at $32.48 billion as of December 17 this year, but under the International Monetary Fund's BPM6 method, the figure was $27.81 billion, according to the latest Bangladesh Bank data.

The governor said steps taken by the central bank have helped stabilise the overall financial sector, adding that governance weaknesses remain a major concern in the banking sector.

The banking regulator has been able to keep the banking sector stable and maintain public confidence despite persistent structural challenges, he said at a seminar titled "Banking Sector Reform: Challenges and Way Forward," organised by the Economic Reporters Forum in Dhaka.

"Several banks are facing huge capital shortfalls and high levels of non-performing loans (NPLs)," he said, adding that Bangladesh currently has the highest NPL ratio in the world.

However, Mansur said he hopes the situation will begin to improve soon.

"Within December, NPLs are likely to come down," he said, adding that restoring sound governance in banks is a priority, though it will take time to deliver sustainable results.

The BB governor also addressed recent consolidation moves in the sector, saying depositors of the five merged banks would get their money back soon.

He expressed hope that the merged banks would be able to make profits within their first year of operation.

On the non-bank financial institution (NBFI) sector, Mansur said nine NBFIs would be liquidated under the regulator's resolution plan.

"Shareholders of those institutions will not receive anything, but depositors will get their funds back," he said.

Fahmida Khatun, executive director of the Centre for Policy Dialogue, and Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, also spoke at the event.​

 

[Saif]

Banking crisis laid bare in 2025, lasting fixes hinge on next govt

When bankers entered the new year and opened their books for 2025, many quickly realised that the scale of long-buried damage was too large to hide any longer.

www.thedailystar.net

Banking crisis laid bare in 2025, lasting fixes hinge on next govt

When bankers entered the new year and opened their books for 2025, many quickly realised that the scale of long-buried damage was too large to hide any longer.

Years of political interference, widespread lending irregularities, loan scams and an overall lax regulation had hollowed out the balance sheets.

What followed was not a recovery year, but somewhat of a reckoning. The interim government took bold steps to confront the financial sector crisis, pushing through a bank merger, non-bank liquidations, new laws and tighter supervision.

Yet by the end of the year, the financial sector readings tell a sobering story. Bad loans are at a record high, depositor confidence is shaken, and reforms are still constrained by old power structures.

These constraints became painfully clear as the year progressed, culminating in alarming data by the third quarter.

As of September, non-performing loans (NPLs) in the banking sector surged to Tk 6.44 lakh crore, nearly 36 percent of total outstanding credit. This was more than double the ratio a year earlier, and the highest level since 2000.

Besides, more than a dozen commercial lenders reported default ratios above 50 percent, showing that distress was no longer confined to a handful of weak institutions.

Large corporate groups accounted for a massive share of new defaults, especially after the fall of the Awami League government in August 2024.

The rise in bad loans came amid a broader macroeconomic squeeze.

Inflation remained high at around 8 percent, well above the central bank's target, while private sector credit growth slowed to record lows as lenders pulled back.

Throughout the year, new investment remained stalled, as borrowing costs climbed with the central bank holding the policy rate at 10 percent -- the highest among neighbouring economies.

Lending rates reached 16 percent to 17 percent, further dampening business activity. Confidence, already fragile, eroded further as depositors started to question the safety of their savings.

Faced with mounting stress, the interim government opted for emergency repair rather than incremental change.

The most discussed move was the merger of five troubled shariah-based lenders into the state-run Sammilito Islami Bank PLC.

Licensed on 30 October, the new bank became the largest Islamic lender in the country overnight, with paid-up capital of Tk 35,000 crore, including Tk 20,000 crore from the government.

The merger dominated public attention throughout the second half of the year. Depositors rushed to branches, overwhelming staff and triggering chaos in several locations. Although the Bangladesh Bank provided liquidity support multiple times, withdrawals continued, while many customers were unable to access their funds.

Four of the banks -- First Security Islami Bank, Social Islami Bank, Union Bank and Global Islami Bank -- had been dominated by the controversial S Alam Group, while EXIM Bank was controlled by Nazrul Islam Mazumder of Nassa Group.

This ownership concentration highlighted how political patronage had shaped the crisis.

Authorities assured depositors that their money would eventually be recovered, but the central bank governor made clear that general shareholders would receive nothing, declaring their scrips worthless.

Alongside the merger, the banking regulator moved to shut down nine troubled non-bank financial institutions. Together, these actions marked a break from the long-standing practice of keeping weak institutions alive through regulatory indulgence.

To support the reform initiatives, the government also strengthened the legal framework for crisis management.

The Bank Resolution Ordinance 2025 gave authorities the power to intervene in failing banks, protect depositors and impose losses on shareholders. The central bank set up a dedicated Bank Resolution Department to implement the law.

In November, the Deposit Protection Ordinance 2025 doubled the insured deposit ceiling from Tk 1 lakh to Tk 2 lakh, covering about 93 percent of depositors nationwide.

Governance reform, however, proved more contentious.

Bangladesh Bank Governor Ahsan H Mansur initiated steps to amend the Bangladesh Bank Order 1972 to strengthen central bank autonomy and align it with global standards.

The draft proposal included removing bureaucrats from the board and reducing political influence. Resistance from within the bureaucracy and the finance ministry quickly followed, slowing progress.

Economists argued that genuine independence of the central bank would require abolishing the Banking and Financial Institutions Division under the finance ministry, but officials opposed the idea.

By year-end, the push for BB's autonomy had slowed, leaving the future of reform uncertain without strong political backing.

Meanwhile, other regulatory measures advanced more quietly.

The central bank updated loan classification rules, conducted asset quality reviews to assess the actual health of bank balance sheets and prepared to shift toward risk-based supervision.

Moving away from checklist inspections toward continuous risk monitoring, a key condition of the International Monetary Fund (IMF) for its ongoing loan programme, is scheduled for full implementation in January 2026.

Draft amendments to the Bank Company Act, which are intended to tighten eligibility for bank owners and directors, were prepared but left for the next elected government as the country entered the election cycle.

While banking reforms dominated headlines, the external sector offered some relief.

A crackdown on illegal money transfer channels like hundi and hawla helped stabilise the foreign exchange market, while lower import costs eased pressure on reserves.

Expatriate Bangladeshis sent a record $30.04 billion in remittances in the fiscal year 2024-25, the highest ever in a single fiscal year.

Gross foreign exchange reserves rose to $32.57 billion by mid-December, up from $24.94 billion a year earlier, reversing the sharp decline seen under the previous regime.

In 2025, new technologies also began to appear in the banking conversation, though more as a promise than a right-now solution.

Some banks rolled out early AI-powered services, and the Bangladesh Bank reopened applications for digital bank licences, attracting interest from telecom operators, financial institutions and conglomerates.

These initiatives signalled a longer-term shift but did little to address the immediate crisis of governance and asset quality.

Now, as the country ends 2025 and prepares to enter another new year, one conclusion stood out. The outgoing year did not fix the banking sector, but it stripped away illusions.

The true scale of bad loans was revealed, political protection weakened, and the first tools for orderly resolution were put in place. Whether these patchwork repairs evolve into lasting reform will depend on political will after the election and the willingness to confront entrenched interests. For now, the system remains fragile, repaired but far from healed.​

 

[Saif]

Depositors of five crisis-hit banks can finally start withdrawals from Monday

In a major move to stabilise the banking sector, Bangladesh Bank has approved the merger of five crisis-stricken Islamic banks into a single entity named Combined Islamic Bank PLC. The central bank confirmed on Thursday that the withdrawal process for depositors will begin next Monday or Tuesday. T

thefinancialexpress.com.bd

Depositors of five crisis-hit banks can finally start withdrawals from Monday

Published :
Dec 26, 2025 08:35
Updated :
Dec 26, 2025 10:28

In a major move to stabilise the banking sector, Bangladesh Bank has approved the merger of five crisis-stricken Islamic banks into a single entity named Combined Islamic Bank PLC. The central bank confirmed on Thursday that the withdrawal process for depositors will begin next Monday or Tuesday. This decision follows a severe liquidity crisis triggered by massive loan scams and irregularities carried out by influential groups during the previous Awami League administration.

The five banks being merged are Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank and Union Bank.

According to a senior Bangladesh Bank official, the complexities regarding deposit returns have been resolved. The funds will be provided under the deposit insurance scheme, and customers can withdraw money from their respective bank branches, UNB reports.

Accounts with balances of up to Tk 200,000 can withdraw the full amount in one go once the scheme starts. Accounts above Tk 200,000 can withdraw a maximum of Tk 100,000 every three months for the first two years.

Senior citizens (60+) and critically ill patients, however, can be exempted from any limit on their withdrawals, as needed for medical or age-related reasons.

If a customer has multiple accounts in one bank, they can withdraw from only one account. However, if they have accounts in different merging banks, they can withdraw the designated amount from each bank.

Central bank data reveal that these five banks currently hold approximately Tk 1.42 trillion in deposits from 7.5 million customers. In contrast, their total loans stand at Tk 1.93 trillion, the majority of which have become defaulted.

To reduce costs, the banks have already slashed employee salaries and allowances by 20 per cent. The existing network of 760 branches and nearly 1,000 ATMs will be consolidated, with overlapping branches in the same areas being merged.​

 

[Saif]

Banks generous in rural deposit sourcing, miserly in lending

Banks are increasingly sourcing deposit from the countryside but their focus on rural Bangladesh keeps fading following tightfisted disbursement of formal credits, widening urban-rural financing gaps, sources say. At the same time, the number of bank branches in the least-developed but promising a

thefinancialexpress.com.bd

Banks generous in rural deposit sourcing, miserly in lending
Potential of local economy left stymied as expansion of bank branches also stalls for months

JUBAIR HASAN
Published :
Dec 27, 2025 00:24
Updated :
Dec 27, 2025 00:24

Banks are increasingly sourcing deposit from the countryside but their focus on rural Bangladesh keeps fading following tightfisted disbursement of formal credits, widening urban-rural financing gaps, sources say.

At the same time, the number of bank branches in the least-developed but promising areas remains almost stuck for months, leaving the potential of local economy in the lurch.

Officials and bankers have identified several factors, such as the rising cost of funds and production in this higher-interest-and-inflation regime that markedly lowered the demand for credits in the rural areas amid persisting economic sluggishness.

As a result, the flow of fresh disbursements into the rural communities continued to dry up in recent months.

In fact, banks, as part of their cost-cutting mechanism, keep reducing the number of rural outlets. Instead, they serve their rural clients through agent banking.

According to Bangladesh Bank (BB) data, commercial banks altogether mobilised Tk 20.31 trillion by end of September last and the rural areas held share of 15.93 per cent or Tk 3.23 trillion.

In the previous recent quarters, the rural-deposit share was 15.52 per cent, 15.67 per cent and 15.83 per cent by the end of December 2024, March and June this year.

In terms of lending, all the scheduled banks had invested Tk 16.20 trillion in various sectors across Bangladesh up to September 2025, with the share of rural areas being 7.46 per cent or Tk 1.30 trillion.

The remaining Tk 14.95 trillion (92.30 per cent) was invested in the urban regions.

The share of bank loans in rural territories was 12.02 per cent in June 2023.

Since then, it has been on a downturn-falling to 8.16 per cent or Tk 1.37 trillion, 7.98 per cent or Tk 1.37 trillion and Tk 1.31 trillion or 7.54 per cent by end-December 2024, March and June this year respectively.

Seeking anonymity, a Bangladesh Bank official has said alongside the disbursement of loans, the rural-deposit portfolio of banks also dropped significantly probably because of the higher inflationary pressure.

Citing data, the central banker says the share of rural deposits was 21.27 per cent or Tk 3.59 trillion until June 2023. Now it is rising in very recent months but still stood below 16 per cent.

In fact, the central banker says, the commercial banks are under immense pressure because of ballooning non-performing loan (NPL) buildups.

"So, the lenders are very cautious in financing any projects. That's one of the reasons behind the plummeting private-sector credit growth and it impacted the rural lending scenario," he adds.

Managing Director of Shahjalal Islami Bank Mosleh Uddin Ahmed says a good number of banks have been facing severe liquidity crunch following mammoth NPL pressure while few others continue regular banking operations through interbank borrowing.

The seasoned banker says a few banks have enough liquidity and they are very careful in terms of approving fresh loans amid persisting economic slowdown and to avoid further NPL risks.

"So, bank financing in rural territories becomes a serious challenge in the current banking context. That's why the rural share in bank lending continues falling," he says.

"If we really want to increase credit flow into the remote areas, we need to allow disbursement of subsidised credits or enhancing refinancing activities," he notes about the banking arithmetic.​

 

[Saif]

https://thefinancialexpress.com.bd/editorial/the-urban-rural-lending-divide

The urban-rural lending divide

Published :
Dec 29, 2025 00:08
Updated :
Dec 29, 2025 00:08

Bangladesh is predominantly a rural country, with around 68 per cent of its population living in rural areas. A large segment of this population is deprived of formal banking services due to a lack of bank branches in remote areas. Although agent banking has helped improve financial inclusion over the past decade, it has largely focused on deposit collection rather than extending credit. As a result, bank loan disbursement has remained heavily skewed. According to a recent report, as of September 2025 rural areas accounted for nearly 16 per cent of total bank deposits, amounting to more than Tk 3.0 trillion. In contrast, their share in loan disbursement stands at a meagre 8.0 per cent, with an overwhelming 92 per cent of bank credit concentrated in urban areas. This is yet another reflection of skewed development priorities and deprivation of small entrepreneurs of vital financial support.

In the absence of bank loans, or due to the difficulty of accessing them, small entrepreneurs in rural areas are often forced to turn to informal financial channels that are unreliable, insecure and costly. For example, a recent study by the Bangladesh Institute of Development Studies (BIDS) reveals that about 20-30 per cent of rural borrowers still rely on mahajans or loan sharks to meet their urgent financial needs, despite the fact that they charge an average interest rate of 145 per cent. Meanwhile, Microfinance Institutions (MFIs), particularly non-governmental organisations (NGOs), are the primary source of credit in rural areas. However, interest rates on microcredit are also considerably higher than those offered by banking channels. This high-cost loan drives up production costs and undermines the competitiveness of rural entrepreneurs.

This limited access to formal banking channels in rural Bangladesh is not merely a matter of inadequate banking penetration, it poses a serious threat to the very notion of balanced and sustainable development. When rural clients are systematically excluded from access to capital, it stunts their economic potential and limits opportunities for upward mobility. Growth becomes increasingly urban-centric, while poverty and underemployment become deeply entrenched in the countryside. Farmers and rural entrepreneurs, who play a vital role in the national economy, are left to grapple with persistent financial challenges often worsened by natural disasters such as floods. Strengthening credit availability at reasonable rates is, therefore, essential to easing these constraints and promoting sustainable development in rural areas.

To this end, long-term policies must be adopted that prioritise rural financial inclusion and ensure that credit reaches underserved populations effectively. Financial institutions -- both banks and NGOs -- need to simplify loan procedures by minimising paperwork and tailoring requirements to the realities of rural borrowers. This is not only about bridging the urban-rural divide so far as access to credit is concerned. It has the potential to empower millions of people, particularly women, by enabling them to participate more actively in economic activities and by fostering the growth of small and micro-entrepreneurs. Economic growth can become truly balanced and inclusive only when small entrepreneurs are not starved of funding.​

 

[Saif]

Refund policy for merging banks: Who's on the priority list?

The Bangladesh Bank (BB) today introduced a comprehensive Bank Resolution Scheme, setting out who will get priority access to deposits at the five merging shariah-based banks and how remaining funds will be refunded over time..The scheme also affects staff at the five merging banks, wh

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Refund policy for merging banks: Who's on the priority list?

The Bangladesh Bank (BB) today introduced a comprehensive Bank Resolution Scheme, setting out who will get priority access to deposits at the five merging shariah-based banks and how remaining funds will be refunded over time.

The scheme also affects staff at the five merging banks, who may face changes to their service conditions and benefits under the new structure.

Under the scheme, small depositors are given the highest priority. Individuals with balances of up to Tk 200,000 are fully protected and may withdraw their money at any time from the scheme's effective date.

Special consideration has also been extended to vulnerable individuals. Depositors suffering from cancer or requiring kidney dialysis will face no withdrawal restrictions, regardless of the size of their deposits, according to the refund framework.

Certain institutions have been placed next in the priority order. Educational and religious institutions, hospitals, provident and gratuity funds of employees, joint venture companies, multinational companies, banks and financial institutions under resolution, and foreign embassies will be allowed to gradually resume normal transactions.

Depositors with balances exceeding Tk 200,000, however, will not have immediate access to their full funds.

After the first Tk 200,000, additional amounts will be released in tranches of Tk 100,000 every three months. Depending on the size of the deposit, full access may take up to 24 months.

For fixed and term deposit holders, the scheme provides for automatic renewals upon maturity. Three-month deposits will be renewed three times, while deposits with tenors between one and two years will be converted into three-year term deposits.

In several cases, the profit rate on deposits will be set at one percentage point below the bank rate, which may be lower than the rates originally offered by the banks.

A separate arrangement applies to institutional deposits held by banks and financial institutions. Fixed deposits amounting to about Tk 7,500 crore will be converted into Class-B shares of the Sammilito Islami Bank PLC – the state-owned bank set to be formed by merging the five failing banks.

Deposits held by other institutions and trusts will also be partly converted into shares, with the possibility of dividend income in the future.

Employee Uncertainty

The resolution scheme also carries major implications for employees of the five merging banks – EXIM Bank, First Security Islami Bank, Global Islami Bank, Social Islami Bank and Union Bank – who have been transferred to Sammilito Islami Bank.

The board of directors has the authority to re-determine service conditions and reduce benefits, and employees are not permitted to object to these changes.

Those who do not wish to stay may resign and receive all benefits under existing rules. Employees found guilty of fraud may be dismissed without further explanation.

The scheme also sets out the roles and responsibilities of Bangladesh Bank, the government and other relevant authorities in the resolution process. It introduces a structured decision-making mechanism to ensure transparency and accountability while resolving distressed banks.

The scheme stated that the five merging banks were involved in widespread irregularities, including fraud, and that the former boards of directors of these banks failed to establish good governance.

Despite liquidity support from the central bank for more than a year, the financial condition of the lenders continued to deteriorate, prompting Bangladesh Bank to declare them non-viable under the Bank Resolution Ordinance 2025 and appoint administrators.​

 

[Saif]

Bankers cautiously optimistic about a turnaround

Bankers sound cautiously optimistic about a turnaround in the problem-ridden banking sector on right-minded policy support following the change-making polls ahead in the new year. Bangladesh saw so many eventful happenings in the just-past year 2025 but it was the most challenging one for banking

thefinancialexpress.com.bd

Bankers cautiously optimistic about a turnaround
Govt finance rebalancing from bank borrowing into revenue raising suggested

JUBAIR HASAN
Published :

Jan 02, 2026 00:29
Updated :
Jan 02, 2026 00:29

Bankers sound cautiously optimistic about a turnaround in the problem-ridden banking sector on right-minded policy support following the change-making polls ahead in the new year.

Bangladesh saw so many eventful happenings in the just-past year 2025 but it was the most challenging one for banking sector because of multiple factors, including a hangover of mismanagement and misdirected lending under the previous regime.

The adversities include persisting economic slowdown, plummeting private-sector credit flow amid higher-interest regime and panic withdrawal of deposits in a spillover effect from large-scale irregularities in few noncompliant banks that led to regulatory resolution interventions.

As a matter of fact, the commercial banks witnessed their NIM or net interest margin narrowing throughout the year that would prompt many of the bankers to forget the calendar year.

As parliamentary election is knocking at the door, scheduled for February 12 next, bankers have become optimistic about a turnaround in the country's entire economic activities on back of policy predictability and improvement in law-and-order situation.

Managing director and chief executive officer of Mutual Trust Bank (MTB) PLC Syed Mahbubur Rahman says the just-passed year was too challenging for banks. "We hope the economy in the post-election period will rebound but the liquidity pressure will remain in the sector."

He predicts the banking sector would see a jump in private-sector- credit demand. If the upward trend in government domestic bank borrowing continues in the coming days, it would create liquidity pressure on banks.

"The government needs to give serious efforts in revenue mobilisation to lessen pressure on banks," the experienced banker says in his suggestion for public-finance rebalancing.

Bangladesh Bank (BB) data show private-sector credits dropped to 6.23 per cent by end of October 2025, the lowest in more than two decades.

In respect of profitability, he says, the net interest margin in banks has been on a slide in recent months for squeezing business avenues amid economic sluggishness. In fact, banks are making some sorts of gains through investment in government securities.


Notwithstanding private-sector-credit push and vibrancy in post-election economy, the banker notes, reforms undertaken by the banking regulator, like amendment to the Bangladesh Bank Order 1972 and the Bank Company Act, have yet to be approved.

"These are very vital on governance purpose," he told The Financial Express.Financial Literacy Course

Managing director and chief executive officer of Pubali Bank PLC Mohammad Ali strikes a high note of optimism about a breakthrough. He says the country would enjoy a significant turnaround in the banking sector this calendar year.

"After the upcoming February election, a political government would take over the economy, which would hopefully create the foundation for political stability. And political stability will help regain confidence of the investors, which will ultimately bring vibrancy in economic activities," he explains his views.

But he alerts that the commercial banks will be required to give serious attention to liquidity management to ensure that the credits flow into productive sectors.

About the possibility of crowding-out effect due to growing government bank borrowing, he says the central bank keeps buying US dollars and in exchange it is injecting liquidity into the market.

"I don't think such thing (crowding-out impact) would arise. I am optimistic that the lending rate would go down below 12 per cent in coming days," he adds.

According to the central bank, the banking regulator, since July 13 last, has purchased a total of $3.14 billion in exchange for around Tk400 billion from the market.


Regarding the NPL buildup, Mr. Ali says the banking sector would see significant drop in the volume or ratio of NPLs because of the various steps once the December-end data of the classified loan are made.

Managing director and chief executive officer of NRBC Bank Dr. Md. Touhidul Alam Khan opines, "As we look towards 2026, the banking sector stands on the brink of a significant transformation, particularly with a new government on the horizons.

"This presents a unique opportunity to reshape the narrative of financial governance. A robust banking system rooted in public trust, guided by competent professionals rather than political connections, is essential for achieving lasting financial stability."

However, establishing political neutrality requires more than just regulatory mandates. It necessitates a fundamental shift in mindset. "Policymakers must recognize the importance of a financially independent banking sector, while bankers must see themselves as stewards of economic integrity."

He has also told the FE correspondent, "In addition, the integration of comprehensive internal audit processes-including a built-in forensic audit system staffed with skilled personnel-and a Risk-Based Supervision (RBS) framework will significantly improve oversight and accountability."

He also suggests adopting an Expected Credit Loss (ECL) model in line with IFRS 9, while ensuring alignment with international banking standards, will further strengthen credibility and confidence in the sector.

Seeking anonymity, the treasury head of a leading private commercial bank says liquidity support matters as the struggling business entities would create some liquidity pressure on banks in the days ahead.


Under the policy support, he says, commercial banks need to give two years of grace period to such businesspeople. It means, the banks will get nothing in the first two years but they have to pay interest to the depositors.

"It will create liquidity pressure on the banks in the coming days," he says.

The bank executive informs that 2025 was a learning year for the bankers who see the result of providing loans without proper checking. "I think the bankers will be very careful in terms of giving fresh loans," he adds.

Regarding trust regaining, the bank executive says it will not be an issue if the government properly settles down the payment affairs of the depositors in the five Islamic banks merged into the country's largest Islamic bank very recently.​