[🇧🇩] Banking System in Bangladesh

[Saif]

Safeguarding depositors' interest

Depositors' trust is the cornerstone of any financial institution, whether a bank or a non-bank entity. Individuals entrust their hard-earned savings to these institutions with the belief that their money will remain safe and accessible whenever needed. This fundamental trust factor is the engine t

thefinancialexpress.com.bd

Safeguarding depositors' interest

FE
Published :
Apr 13, 2026 00:00
Updated :
Apr 13, 2026 00:00

Depositors' trust is the cornerstone of any financial institution, whether a bank or a non-bank entity. Individuals entrust their hard-earned savings to these institutions with the belief that their money will remain safe and accessible whenever needed. This fundamental trust factor is the engine that keeps banking operations running. However, history is replete with examples of financial crises, fraud and mismanagement that have jeopardised depositors' interests, underscoring the need for a foolproof protection mechanism. To this end, adoption of the 'Deposit Protection Bill 2026' in parliament on Friday last by doubling the deposit insurance coverage from Tk 100,000 to Tk 200,000 per depositor is a step in the right direction. The new law replaces the existing 'Bank Deposit Insurance Act, 2000' and, for the first time, bring non-bank financial institutions (NBFIs) under its insurance coverage. However, questions arise about the adequacy of the protection limit and whether it is sufficient to protect the savings of medium and large depositors.

Under the new law, in the event of the liquidation of a bank or NBFI, each depositor will be guaranteed a maximum payment of Tk 200,000. But what about depositors whose savings exceed this limit? The bill states that they may file claims for the remaining balance with the liquidator of the failed institution. It, however, falls short of clarifying the extent of the liquidator's obligation to compensate depositors, or the manner in which the regulatory authorities would intervene to facilitate such payments from the institution's remaining assets. If the law in question does not address the full gamut of depositor protection and merely stipulates an insurance ceiling, it is misleading to call it "Deposit Protection Act". The title of the previous law, the Bank Deposit Insurance Act, appears more appropriate.

The authorities, therefore, must clarify the full extent of depositor protection measures under the new law, as well as under the Banking Companies Act. In particular, it should be made explicit how claims beyond the insurance ceiling will be settled through liquidation processes, and what role regulatory bodies and the central bank will play in safeguarding remaining depositor funds. A transparent and comprehensive framework is essential to avoid ambiguity and ensure that depositors fully understand the level of protection available to them under the law. Otherwise, if depositors come to believe that Tk 200,000 is the maximum compensation they would receive in the event of a bank or NBFI liquidation, it is likely to trigger alarm and erode confidence. Such apprehension may prompt many to withdraw funds exceeding the insured limit, leading to a gradual decline in deposits, which, in turn, would constrain banks' lending capacity and set off a ripple effect across the broader economy.

Although no local bank has been officially liquidated in Bangladesh to date, the banking sector has been bled dry due to systematic looting and corruption during the tenure of the deposed authoritarian regime. A task force formed during the interim government found at least 10 banks as "technically bankrupt". The struggling banks were kept barely afloat through repeated injection of public funds, which is both wasteful and unsustainable in the long run. The state of over a dozen NBFIs is even worse, though their crisis have often been overshadowed by the broader banking sector crisis. In recent years, frustrated depositors have repeatedly taken to the streets demanding the return of their savings. The Deposit Protection law therefore comes at a critical juncture, when the authorities will be required to determine the fate of struggling financial institutions and safeguard depositors in the process.​

 

[Saif]

Bank Resolution Act, 2026: Doors open for ex‑owners to reclaim banks

The newly enacted Bank Resolution Act, 2026, paves the way for former owners to regain control of merging banks under relatively easy terms, a move seen as a reversal of the interim government’s banking reform.

www.thedailystar.net

Bank Resolution Act, 2026: Doors open for ex‑owners to reclaim banks

12 April 2026, 03:21 AM

Md Mehedi Hasan

The newly enacted Bank Resolution Act, 2026, paves the way for former owners to regain control of merging banks under relatively easy terms, a move seen as a reversal of the interim government’s banking reform.

Under the act, former directors or owners of banks, merging or listed for mergers, can pay 7.5 percent upfront of the amount injected by the government or the Bangladesh Bank to reclaim the banks. The remaining 92.5 percent is to be repaid within two years at 10 percent simple interest.

“The law appears to reward those responsible for the crisis rather than holding them accountable.”

Zahid Hussain, former lead economist, WB, Dhaka office

As part of its reform drive, in May 2025, the interim administration had approved the Bank Resolution Ordinance, 2025, to merge five troubled Shariah-based private banks into a state-run entity titled Sommilito Islami Bank.

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

The government and Bangladesh Bank injected Tk 35,000 crore as capital into the merging bank, while the central bank also provided the five banks with additional liquidity support.

Under the ordinance at the time, former owners were barred from involvement, as many were accused of financial scams and embezzlement.

The boards of four of the banks were dominated by the controversial S Alam Group, led by its Chairman Mohammed Saiful Alam, while Exim Bank was long controlled by Nassa Group Chairman Md Nazrul Islam Mazumder.

The BNP-led government has now amended the ordinance, passing it into law in parliament on Friday after Finance Minister Amir Khosru Mahmud Chowdhury placed it before the House.

Bangladesh Bank officials told The Daily Star that concerns remain over how these banks will be managed if former owners return and whether depositors will be able to recover their money.

They also said that if a bank is returned to its previous owners, it cannot easily be taken back again.

“This raises doubts about whether they would be able to run the banks properly and ensure full legal and regulatory compliance,” one official said, adding that the return of the previous owners could hinder the ongoing merger process.

The act empowers the Bangladesh Bank to permit previous owners or other eligible applicants to acquire a bank’s shares, assets, and liabilities.

Under the new law, applicants, including former directors or investors, must commit to fully repaying all financial support previously extended by the government and the central bank.

They are required to inject fresh capital to address existing deficits and restore financial health, and settle outstanding claims of depositors, domestic and foreign creditors, and third parties.

About accountability during the banks’ restructuring process, the act states that any losses incurred by individuals or institutions must be compensated.

The applicants must also agree to restrictions on share transfers and commit to strengthening corporate governance, risk management, and compliance structures.

Before approval, the Bangladesh Bank will have to conduct due diligence and seek the government’s clearance. Even after approval, the central bank will closely monitor the merged entity for two years, with a special committee reviewing compliance.

Failure to meet conditions could lead to cancellation of approval and further regulatory action under existing laws.

Contacted for comments on the new law, Zahid Hussain, former lead economist at the World Bank’s Dhaka office, warned that the provision undermines past reform efforts.

“If, under this law, the previous owners return and reclaim their organisations, the integrity of the new structure created after the merger could be lost. In that case, all merger-related work would effectively become meaningless,” he said.

He said it is widely understood that a large portion of loans in these banks have already turned bad, largely taken by related parties.

“The responsibility for this distress lies with the sponsors and related borrowers,” he said. Allowing them to return, he argued, will set a damaging precedent.

“It reinforces a culture of impunity in the financial sector, where wrongdoing is not punished. Governance will weaken further.

“After so many reforms, audits, and a formal merger process, if everything can be reversed through a legal adjustment, it raises serious doubts about the sustainability of institutional reform,” Zahid said.

“Ultimately, the law appears to reward those responsible for the crisis rather than holding them accountable,” he added.​

 

[Saif]

The Financial Express | First Financial Daily of Bangladesh

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‘Bank Resolution Act’ facilitates corruption and moves to rehabilitate 'bank looters': TIB

UNB

Published :
Apr 13, 2026 21:51
Updated :
Apr 13, 2026 21:51

Transparency International Bangladesh (TIB) on Monday expressed grave concern over the ‘Bank Resolution Act, 2026,’ claiming that new provisions will facilitate corruption and allow "identified looters" to regain control of the banking sector.

The anti-graft watchdog stated that the inclusion of Section 18(a) in the Act guarantees impunity instead of ensuring justice for those responsible for the collapse of weak banks.

In a statement, TIB Executive Director Dr. Iftekharuzzaman described the move as "self-defeating," noting that it effectively rewards individuals who plundered the sector.

The TIB chief pointed out that the “Bank Resolution Ordinance, 2025”—issued during the interim government—had barred individuals responsible for a bank’s collapse from returning to ownership even if funds were repaid. However, the new 2026 Act reverses this stance.

“Whatever justification the government may offer, this decision facilitates and shields corruption. It does not ensure legal accountability; instead, it signals a shift in policy capture, leaving room for the re-emergence of kleptocratic practices,” Dr. Zaman said.

TIB questioned the logic behind allowing former owners to re-acquire shares by depositing only 7.5 per cent of a government-determined amount, with the remaining 92.5 per cent payable over two years at a 10 per cent interest rate.

“By what magic have the former owners, who pioneered the plundering of this sector, suddenly attained such purity?” Dr. Zaman asked, questioning how these individuals would suddenly be capable of covering capital shortfalls and repaying all depositors.

The organization expressed skepticism over the central bank's ability to monitor these conditions, fearing that Bangladesh Bank remains "plagued by conflicts of interest."

Call for Reconsideration:

The statement further noted that passing such a law by majority vote in Parliament contradicts the ruling party’s electoral manifesto regarding financial sector reforms.

TIB warned that without a proper legal process to ensure accountability, no qualitative improvement will occur in the banking sector. The organization urged the government to reconsider the provisions to prevent the burden of deeper insolvency from falling on the general public.​

 

[Saif]

Act now or finance the fallout

Bangladesh’s banking sector has arrived at a critical crossroads. Currently, the financial landscape is strained by a triad of systemic challenges: high non-performing loans, a widening capital shortfall, and the crowding out of private investment by heavy government borrowing. These challeng

thefinancialexpress.com.bd

Act now or finance the fallout

SHARIF ZAHIR

Published :
Apr 13, 2026 13:07
Updated :
Apr 13, 2026 13:29

Bangladesh’s banking sector has arrived at a critical crossroads. Currently, the financial landscape is strained by a triad of systemic challenges: high non-performing loans, a widening capital shortfall, and the crowding out of private investment by heavy government borrowing. These challenges are not isolated incidents but rather the cumulative result of prolonged gaps in governance, enforcement, and institutional accountability.

As of September 2025, Bangladesh’s Gross NPL ratio had escalated to 35.73%, painting a stark picture of poor asset quality. This figure is particularly concerning when viewed in a regional context, as it stands in sharp contrast to the significantly lower ratios maintained by neighbouring peers.

Banks faced a substantial loan loss provision shortfall of BDT 1.06 trillion in 2024, an increase of BDT 868.70 billion compared to the previous year. The World Bank assessed that restructuring Bangladesh’s banking system requires at least 10% of GDP for recapitalisation, which equates to BDT 5.5-6.0 trillion.

Fast forward to December 2025 from December 2020, outstanding govt. Domestic debt from the banking sector more than tripled to BDT 5.99 trillion. Meanwhile, private sector credit growth hit one of the lowest in decades at 6.03% in January 2026.

Addressing this crisis must be a national economic priority - not merely a banking sector concern. We urge the government as well as the policymakers to take timely, decisive action across several key areas. Some require budget allocations; others require legislative resolve. But all of them require political will.

First - Asset Recovery Framework

The first crucial reform must be a robust Asset Recovery Framework. Drawing on models from Malaysia, South Korea, and the Philippines, it is evident that recovery requires more than just policy; it demands independent valuation and genuine political backing to enforce accountability. Alongside preparing a unified task force, Bangladesh needs to fast-track financial courts, maintain time-bound insolvency protocols, and invest in forensic accounting and international asset tracing to recover stolen assets. Overall, operationalising this framework would require a targeted budgetary commitment of BDT 30.0 to 50.00 billion.

To support this recovery culture, allowing full tax deductibility of loan loss provisions would be critical. Ensuring banks are not taxed on unrealised income will encourage transparent NPL recognition, facilitate faster recovery, and build stronger financial stability across the banking sector.

Second - Collateral and Mortgage Reform

The second reform can be establishing a unified digital collateral registry, covering land, apartments, machinery, inventory, receivables, and shares to strengthen transparency and credit discipline. An allocation of Tk 30.0 billion is needed for digitisation and integration with land records, NID, RJSC, and credit systems, curbing multiple pledging and unlocking SME financing.

Third - Structured, Conditional Recapitalisation of Banks

A comprehensive recapitalisation of the banking sector is crucial, the majority of which should be raised from shareholders through rights issues, strategic investors, and Tier-2 instruments. Public funds, ranging from BDT 500 to 800 billion annually, may be reserved for systemic institutions only, strictly conditional on the delivery of reforms, to avoid repeating past patterns of unaccountable capital injections.

Alongside recapitalisation, reducing corporate tax on banks to 28-30% (from 37.5-42.5%) will align with global standards of tax rate, strengthen capital adequacy under Basel III, and expand lending capacity for SMEs, trade, and industry, directly supporting the budget's growth and job creation objectives.

Fourth – Employment Creation Through Banking

Beyond financing businesses, banks are key engines of job creation. An MSME and employment-linked credit framework, supported by a BDT 100 -150 billion credit guarantee fund, can provide targeted support, combining BDT 40-60 billion for interest subsidies tied to job creation and Tk 150-200 billion for industrial modernisation in textiles, focusing on synthetic and technical upgrades.

Drawing lessons from India’s PLI scheme and Tamil Nadu’s textile initiatives, structured incentives can drive large-scale employment. However, to ensure financial discipline and traceability, these funds must be channeled through commercial banks rather than direct government grants.

Fifth – Reduce Government Borrowing from Banks

Outstanding government debt from the banking sector jumped to 55.3% of domestic debt in Dec’25, up from 32.1% in Dec’20. Under these conditions, asking banks to expand SME and private sector credit is like asking someone to run with a weight tied to each leg.

Government borrowing from banks must be reduced gradually to below 30% of total borrowing. Achieving this requires stronger tax collection to narrow the fiscal gap, disciplined public spending, and accelerated development of the domestic bond market and institutional investor base.

Otherwise, private sector growth will continue to be crowded out.

Sixth – Tax Collection and Role of Banks

To curb aggressive government borrowing and mitigate the crowding-out of private investment, revenue mobilisation must become a primary fiscal priority. With Bangladesh’s tax-to-GDP ratio currently below 7.0%, the banking sector is uniquely positioned to act as a strategic partner in modernising tax administration.

A BDT 20–30 billion allocation to integrate tax digitisation directly into the banking infrastructure can create a high-impact, reciprocal partnership: the government secures a more robust revenue stream, while the banking system benefits from reduced public sector credit demand and a more liquid private lending market.

Seventh – Cashless Economy and Digital Payments Interoperability

The last reform cannot but be a shift toward a cashless, fully interoperable economy. A BDT 25-40 billion allocation should support national QR code expansion, merchant onboarding, rural agent networks, and the infrastructure required for seamless interoperability.

However, funding alone is not sufficient. Bangladesh Bank must mandate full interoperability between all mobile financial service providers and commercial banks within 18 months, using technical standards set by the central bank rather than relying on voluntary agreements among competitors.

India achieved this through its Unified Payments Interface, handling $2.5 trillion in annual transactions and 14 billion transactions per month, while Brazil saw similar success with Pix. With strong mobile penetration and an established banking infrastructure, Bangladesh now needs the regulatory mandate and investment to build these shared digital rails.

Finally, the success of the things I have mentioned hinges on the operational independence of Bangladesh Bank. Such autonomy fosters an institutional credibility that fiscal allocations alone cannot provide. By prioritising these reforms, the banking system can restore public confidence and re-establish itself as the essential foundation for sustainable growth, investment, and employment in Bangladesh.

Let’s act now or finance the fallout.

The writer is Sharif Zahir, Chairman of United Commercial Bank​

 

[Saif]

Banking sector: Why is there no escape from the cycle of defaulted loans?

It seems we cannot break free from the culture of default loans. Default loans are increasing, or even if reduced temporarily by some means (rescheduling or restructuring), they rise again under the pretext of some crisis or another. We've repeatedly heard that this excessive amount of...

en.prothomalo.com

Banking sector: Why is there no escape from the cycle of defaulted loans?

Mamun Rashid

It seems we cannot break free from the culture of default loans. Default loans are increasing, or even if reduced temporarily by some means (rescheduling or restructuring), they rise again under the pretext of some crisis or another.

We've repeatedly heard that this excessive amount of defaulted loans has created multidimensional risks in the banking sector. Defaulted loans are consuming good assets, increasing bad assets, and overall, raising the level of loan risk for banks. High default loans signify weaknesses in loan management and reveal a lack of capability on the part of borrowers to repay their debts.

Through the deterioration of these indicators, the overall weakness of the economic condition is starkly highlighted. A recent report by the central bank also made comments on the upward trend of defaulted loans concerning the banking sector and the overall economic situation.

The report states that to maintain financial sector stability and the well-being of the banking sector, the upward trend of defaulted loans must be effectively controlled. At the same time, it's necessary to recover from the status of accumulated defaulted loans to reduce the excessively increased defaulted loans. The current rate of defaulted loans in the banking sector is identified as concerning.

There are complaints that the amount of collateral against defaulted loans is very low. Consequently, despite legal initiatives, the majority of defaulted loans have turned into bad or unrecoverable loans. A 100 per cent provision must be kept against such loans. In the financial crunch, many banks cannot maintain the required provision, which is gradually decreasing the quality of assets in banks.
The report indicates that the rate of defaulted loans in the banking sector as of December 2024 was 19.90 per cent. By the end of September last year, it had increased to 36.30 per cent, and by the same year's December, it had decreased again to 31.20 per cent. We know that the open opportunity to renew defaulted loans at special discounts has somewhat reduced the amount.

We now know with certainty that during the past Awami League government, unprecedented looting occurred in several Shariah-based and state-owned banks. As a result, defaulted loans have increased more in these banks, reflecting a lack of good governance and weak loan management. On the other hand, foreign banks have a very low level of defaulted loans, which also results in lower loan risk for them.

The amount of default due to looting during the past Awami League government increased to its highest, reaching Tk 6,450 billion by last September. It decreased slightly to Tk 5,570 billion by last December. In three months, defaulted loans decreased by Tk 880 billion. Some more policies have been relaxed to renew defaulted loans. Now, if ongoing capital loans become defaulted, they can also be renewed. Hence, it is expected that defaulted loans will decrease a bit more in the March quarter.

A designated provision rate is required against defaulted loans. To maintain this, a substantial part of the profit is being held back. If defaulted loans were lower, a large part of the profit could be redistributed as loans. That is no longer feasible while tackling the risk of defaulted loans.

The created defaulted loans are someone's deposits. Consequently, an interest or profit must be paid to depositors at the determined rate against their deposits. This also leads to the outflow of interest or profit money from the bank. On the other hand, the bank's profit is reduced, adversely affecting the share prices of these banks in the capital market.

The report shows that compared to December 2024, the rate of defaulted loans in the business and trade sector increased the most by last December. Defaulted loans in this sector were 23.40 per cent in December 2024 and increased to 42.5 per cent by last December. The default loan rate is highest in this sector. Among these, the most default happens under the pretext of opening letters of credit (LCs) for importing goods but instead smuggling money abroad without bringing the goods into the country. Additionally, banks' money has not been repaid even after selling imported goods.

Next are the agriculture, fisheries, and forestry sectors. Defaulted loans in these sectors were 11.30 per cent in December 2024 and increased to 28.20 per cent by last December.

There are complaints that the amount of collateral against defaulted loans is very low. Consequently, despite legal initiatives, the majority of defaulted loans have turned into bad or unrecoverable loans. A 100 per cent provision must be kept against such loans. In the financial crunch, many banks cannot maintain the required provision, which is gradually decreasing the quality of assets in banks.

Banks fail to meet international standards, and some banks' LCs are not accepted or confirmed by international banks. This increases the cost of cross-border or international transactions for customers, raising doubts about the overall economic management.

The solution to this situation lies in improving customer risk management in commercial banks, reducing unwarranted interference in management authorities, and ensuring political good governance through a strong central bank.

#Mamun Rashid is economic analyst and banker.​

 

[Saif]

Bank Resolution Act: Why should banks be returned to their former owners?

The BNP government has drafted a law allowing the ownership of five consolidated banks to be returned to their previous owners. This will be considered a historic mistake. Since 1982, private banks have started being established in the country. Currently, the number of private banks has...

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Bank Resolution Act: Why should banks be returned to their former owners?

Moinul Islam
Published: 14 Apr 2026, 08: 30

The BNP government has drafted a law allowing the ownership of five consolidated banks to be returned to their previous owners. This will be considered a historic mistake. Since 1982, private banks have started being established in the country. Currently, the number of private banks has increased to nearly fifty. Bangladesh now has a total of 61 banks. Experts have long argued that, although the country does not need so many banks, successive governments have granted numerous private banking licences in the interest of “crony capitalism.” The highest number of banks were established during the regime of dictator Sheikh Hasina.

The awarding of these licences was done to provide unbelievable opportunities for capital plundering by Hasina's relatives, influential leaders of the Awami League, oligarchic businessmen, and ''robber barons.'' Despite repeated objections from the late Finance Minister Abul Maal Abdul Muhith, Hasina could not be restrained from making such erratic decisions.

Many of the wealthy businessmen and industrialists during Bangladesh's 55 years have been owners or directors of some bank. While they may not be able to borrow too much from their banks, they could easily obtain loans from each other's banks. This way, they have established almost monopolistic control over the total bank loans in Bangladesh. Various studies have found that nearly 82 per cent of the country's non-performing bank loans are stuck with them.

Although it may not be fair to label them as Bangladeshi versions of America's ''robber barons,'' the entanglement of economy and politics, and the patronage of ruling authorities have become defining features for most of Bangladesh's wealthy individuals. Among these, the distribution of bank ownership is identified as a major form of patronage.

According to a 2018 survey by the US research firm ''Wealth-X,'' 355 millionaire wealthy individuals in this country have positioned Bangladesh as one of the world's champions in the rise of wealthy people. In my view, bank loan plundering has played the most crucial role in the growth of wealthy individuals in Bangladesh.

Reports in newspapers revealed that a business group in this country was provided with bank loans amounting to Tk 220 billion. During Hasina's regime, another businessman, S Alam, was allowed control over seven banks in the country. A ''suo moto'' rule by a High Court bench to investigate him was halted by an order from the Supreme Court's ''Chamber Judge.''

While several of Sheikh Hasina's relatives have become owners of banks, there is no trace of how they met the ownership condition of depositing at least Tk 200 million. Perhaps other business bank-directors have cleared the debts on behalf of these relatives. During Hasina's regime, extending the terms of bank owners, directors, and their family members became a ''culture.'' Undoubtedly, owning banks or becoming a director has become the most reliable avenue for easily becoming a millionaire in this country.

Between 2009 and 2024, the banking sector suffered the most looting, resulting in 11 of the 61 banks facing bankruptcy. Among these 11 banks, seven were owned by the S Alam Group from Chittagong—Islami Bank Bangladesh, SIBL, First Security Islami Bank, Union Bank, Commerce Bank, NRB Global Bank, and Al-Arafah Islami Bank. Allowing one person to control seven banks is unprecedented anywhere in the world.

Until 2017, Islami Bank was primarily controlled by Jamaat-e-Islami. At that time, it was the largest of the country's private sector banks, handling about 30 per cent of the remittance flow from expatriates. Such a powerful bank was brought under S Alam's control under the direct instructions and support of the dictator Hasina.

From 2017 till 5 August 2024, within seven years, S Alam looted around Tk 700 billion from Islami Bank in various ways, bringing it to the brink of bankruptcy. S Alam has looted and smuggled approximately Tk 2000 billion from seven banks under his control abroad. A relative and close associate of S Alam, the government's land minister Saifuzzaman Chowdhury, plundered the United Commercial Bank. The institutions of Beximco Group, owned by Hasina's advisor Salman F Rahman, owe over Tk 500 billion in overdue loans across various banks.

Recently, to save the five looted banks from bankruptcy, a ''United Islami Bank'' was launched. Research by the White Paper Committee, led by Debapriya Bhattacharya, revealed that through Hasina's 15.5 years of loot dynamics, a total of 234 billion dollars have been plundered and mostly laundered abroad, amounting to about 16 billion dollars annually.

It has been conclusively proven to economists over the past one and three-quarter years since the uprising on 5 August 2024, and her ousting from power, that even if Hasina had not lost power as a dictator, she could not have saved the country’s economy from the inevitable aftermath of an ''economic meltdown.'' From this perspective, we have indeed been spared the embarrassment of becoming another Sri Lanka. However, there is a significant doubt about whether the laundered 234 billion dollars can ever be brought back to the country.

The current government, perhaps following the path of the interim government, may be able to halt the decline in foreign exchange reserves through export earnings and the growing remittance flow. Still, the billions laundered abroad by capital smugglers will never be recovered by the nation. Instead, until the fall of Hasina's government, during 15.5 years, the Bangladesh government has submerged Tk 18.35 trillion in debt, most of which has been laundered. This laundered money will enable Hasina, her family, relatives, a few oligarchic businessmen, and several thousand money launderers to enjoy their remaining lives abroad in comfort and luxury!

Now the BNP government is paving the way for these capital smugglers to return to prosperity by arranging for the banks' ownership to be returned to their previous owners. The removal of Ahsan H Mansur immediately after taking power and the appointment of a businessman as the governor of Bangladesh Bank have led to suspicions among informed circles that the BNP government is possibly heading towards the rehabilitation of capital looters. According to the latest figures, the amount of classified loans in the banking sector of Bangladesh is 31 per cent of total bank loans. Is the current government unlikely to focus on recovering this vast non-performing loan, as indicated by the move to return bank ownership to former ownership circles?

#Moinul Islam is an economist and retired professor, Department of Economics, University of Chittagong​

 

[Saif]

Can a bank resolution framework work if discredited owners return?

I worked with senior officials at Bangladesh Bank in developing the framework for the 2025 Bank Resolution Act, which is similar to India’s Insolvency and Bankruptcy Code, 2016, and analogous frameworks in Indonesia and a few other comparable economies.

www.thedailystar.net

Can a bank resolution framework work if discredited owners return?

16 April 2026, 12:00 PM

Mamun Rashid

VISUAL: AFIA JAHIN

I worked with senior officials at Bangladesh Bank in developing the framework for the 2025 Bank Resolution Act, which is similar to India’s Insolvency and Bankruptcy Code, 2016, and analogous frameworks in Indonesia and a few other comparable economies. The primary purpose of this arrangement was to protect banks from their old, defaulting owners, who were reluctant to recapitalise their institutions to cover capital shortfalls arising from continuous insider lending and bad loans, which had crippled internal cash generation and stunted future growth.

The people spearheading this process sincerely believed that without increasing the capital base, banks could neither generate fresh loans nor repay small depositors. Although the government itself recapitalised the Sammilito Islami Bank, the destination model of the original merger framework was always predicated on owners or strategic investors coming forward to inject fresh, risk-based capital. This was especially critical given that most of the previous defaulting owners had either fled the country to evade legal action or simply lacked the financial capacity to inject funds into ailing, cash-strapped banks.

The recent amendment to the Bank Resolution Ordinance 2025, now passed as legislation by the BNP government in 2026, has created a mechanism through which previously merged banks can revert to their former owners. Under this provision, former shareholders may reacquire control by paying just 7.5 percent of the total funds disbursed by the government and Bangladesh Bank for operating the merged entities. This is where alarm bells ring loudly.

According to a Samakal report, the central bank had internally opposed this provision. Parliamentary opposition parties also raised objections. Nevertheless, the bill was passed with Section 18(A) intact.

The section states that former shareholders listed under the Bank Resolution Ordinance 2025 or any individual deemed suitable by Bangladesh Bank may apply to the central bank as resolution authority to reacquire the bank’s shares, assets, and liabilities. Applicants must submit undertakings covering: repayment of all government and central bank funds; injection of fresh capital to address existing shortfalls; settlement of all depositor, creditor, and third-party claims; discharge of all tax and regulatory obligations; compensation to parties that incurred losses during resolution; and full compliance with any governance reform conditions stipulated by Bangladesh Bank. On financial terms, applicants must furnish a pay order equivalent to 7.5 percent of total injected funds within three months of final approval, with the remaining 92.5 percent repayable within two years at simple interest of 10 percent per annum.

The concern is unmistakable. In Bangladesh’s institutional context, once ownership reverts (even conditionally), dislodging incumbents again becomes an extraordinary challenge. A 7.5 percent upfront threshold is a nominal commitment against the magnitude of systemic damage already inflicted.

Equally troubling is how Section 18(A) entered the bill in the first place. A 10-member review committee constituted on April 1 and led by an additional secretary of the Financial Institutions Division had recommended reducing the ordinance from 98 to 74 sections after careful deliberation. But this committee, comprising members from the Ministry of Finance, the Legislative and Parliamentary Affairs Division, and Bangladesh Bank, reportedly did not recommend this clause. According to the Samakal report, it was inserted just before the bill was tabled in parliament. Bangladesh Bank apparently only learned of it the following morning and formally requested the Ministry of Finance not to proceed, to no avail.

Regulators rightly argued that any such provision should have explicitly barred those responsible for a bank’s deterioration from reacquiring ownership. Full repayment of depositor and creditor liabilities should have been a precondition, not a forward-looking undertaking. The distinction carries enormous practical weight.

The scale of the damage clarifies why. Under the Bank Resolution Ordinance 2025, five Shariah-compliant banks—EXIM Bank, Social Islami Bank, First Security Islami Bank, Union Bank, and Global Islami Bank—were merged into a consolidated Islamic bank. The entity carries paid-up capital of Tk 35,000 crore, with the government contributing Tk 20,000 crore and the remaining Tk 15,000 crore from the institutional deposits of the banks and the Deposit Insurance Trust Fund.

As of last December, the five merged banks held combined loans of Tk 196,827 crore, of which Tk 165,781 crore, or 84.23 percent, had turned non-performing, against a sector-wide default rate of 30.60 percent. Besides, last December, 22 banks faced a banking capital shortfall totalling Tk 282,603 crore, of which Tk 150,691 crore was the capital shortfall of just these five institutions. EXIM Bank, formerly under Nassa Group’s control, is in relatively better shape with a 62.45 percent default rate and a capital shortfall of Tk 22,625 crore. The remaining four (previously controlled by S. Alam Group) tell a grimmer story: Union Bank has 97.64 percent of its loans classified as defaulted; First Security Islami Bank, 96.43 percent; Global Islami Bank, 96.27 percent; and Social Islami Bank, 75.73 percent, with combined capital deficits running into tens of thousands of crores.

This raises the billion-dollar question: when these banks’ former owners bled the banks dry and literally plundered the institutions’ assets in connivance with their friends and families, as the central bank’s large loans restructuring scrutiny committee revealed, can the banks then ultimately be rescued? Or are we simply opening a new Pandora’s box?

Bangladesh’s banking, hitherto characterised by high non-performing loans, weak risk management, low capital, rampant insider lending, and outright plundering by owners, warrants an overhaul, not any piecemeal solution. We desperately need to come out of political cronyism to bring back confidence into the system. Independence, prevention of conflict of interest, and regulatory compliance should be the way forward, not the distortion of the original purpose to rescue the banking sector.

Mamun Rashid is an economic analyst and chairman at Financial Excellence Ltd.​

 

[Saif]

Agent banking expands access, but gaps remain, study finds

Bangladesh’s agent banking revolution has a paradox at its heart; over the past decade, the country has built one of South Asia’s most extensive agent banking networks over 21,000 outlets stretching from the river deltas of Barishal to the highland fringes of the Chittagong Hill Tracts...

www.newagebd.net

Agent banking expands access, but gaps remain, study finds
United News of Bangladesh . Dhaka 17 April, 2026, 00:04

Bangladesh’s agent banking revolution has a paradox at its heart; over the past decade, the country has built one of South Asia’s most extensive agent banking networks over 21,000 outlets stretching from the river deltas of Barishal to the highland fringes of the Chittagong Hill Tracts, twenty-four million accounts have been opened, the majority by people in rural areas who had never held a bank account in their lives.

But a new policy brief by the International Growth Centre (IGC) found that while agent banking in Bangladesh has significantly widened financial access over the past decade, major gaps remain in credit delivery and gender participation.

The study, hosted by the University of Oxford and the London School of Economics and Political Science (LSE) and published recently, analysed more than 21,000 agent banking outlets across the country, offering one of the most comprehensive assessments of the sector to date.

It highlights a ‘strong expansion but incomplete inclusion’ narrative, where outreach has improved markedly but deeper financial intermediation, particularly access to credit remains limited.

The agent banking model was introduced in Bangladesh in 2013 with a clear mandate: to extend financial services to communities beyond the reach of conventional bank branches, reducing operational costs by routing services through local agents. By 2016, the network had 2,601 outlets. By 2024, that figure had surged to over 21,000, a more than eightfold increase in under a decade.

However, the report notes that this rapid physical expansion is beginning to plateau, suggesting the sector may be approaching saturation in terms of outlet growth.

Future progress, it says, will depend more on improving service depth rather than increasing geographic coverage.

Agent banking has also reshaped the country’s financial geography. Unlike traditional banking where Dhaka and Chattogram dominate agent banking has spread more evenly, with rural areas hosting significantly higher outlet density per capita.

Despite these gains, the study flags a critical weakness: limited credit provision. As of December 2024, nearly two-thirds of agent banking outlets had no outstanding loans, indicating that most agents primarily facilitate deposits, withdrawals and remittance services rather than lending.

‘Without access to credit, financial inclusion remains incomplete,’ the report notes, stressing that credit is essential for households to manage economic shocks and invest in income-generating activities.

Although cumulative loan disbursement through agents reached Tk 240.3 billion by 2024, credit growth remains significantly lower than deposit mobilisation, with a loan-to-deposit ratio of 57.3 per cent, indicating a continued gap in financial intermediation.

The so-called ‘zero-loan phenomenon’ is particularly acute in remote and structurally disadvantaged regions, including parts of the Chattogram Hill Tracts, where geographic and infrastructural challenges persist.

The findings confirm that agent banking has developed a strong rural footprint, with significantly more outlets per capita compared to traditional bank branches in rural areas.

Rural deposits have also grown steadily, indicating improved access to formal financial services. However, credit penetration in these areas remains comparatively weak.

The report also finds that agent banking expansion often follows existing banking infrastructure, rather than independently targeting underserved or poorer regions, raising concerns about whether the model is fully addressing financial exclusion.

The study revealed a mixed picture on gender inclusion. While female participation as customers is rising women’s account ownership has been growing faster than men’s in recent years, the supply side remains overwhelmingly male-dominated.

More than 92 per cent of agent operators are men, leaving women significantly underrepresented in the delivery of financial services. This gap is not merely symbolic: female agents have been shown in multiple financial inclusion studies across South Asia to be more effective at reaching female clients in communities where social norms constrain women’s interactions with male service providers. A network that is overwhelmingly male-operated may therefore be structurally limiting its own ability to deepen inclusion among the women it is nominally reaching as customers.

This imbalance, the report suggests, may limit accessibility and trust for female clients in certain communities. With expansion slowing, the IGC urges policymakers to shift focus from scaling the network to strengthening its functionality.

Key recommendations include incentivising banks to extend credit through agent outlets, deploying digital tools for credit scoring and loan processing, and adopting targeted strategies for underserved regions.

The report also calls for stronger efforts to increase female participation in the agent network, including enforcing existing gender inclusion policies.

‘Bangladesh’s agent banking experience reflects strong outreach but incomplete financial deepening,’ the study concludes, adding that the next phase must prioritise equitable and effective financial inclusion.​