The government has approved a Tk 1,276.30 crore project to strengthen Bangladesh Bank’s supervision of banks through upgraded digital systems, improve financial-sector safeguards and support reforms aimed at addressing non-performing loans, capital shortages and other systemic risks.
The Financial Sector Support Project-II (FSSP-II), to be implemented by Bangladesh Bank under the Financial Institutions Division of the Ministry of Finance, will run from July 2026 to June 2031.
The approval was given at an ECNEC meeting held at the Cabinet Room of Secretariat with Prime Minister and ECNEC Chairperson Tarique Rahman in the chair on Tuesday.
Of the total project cost, Tk 1,261.54 crore will come from the World Bank’s International Development Association (IDA), while Tk 14.76 crore will be financed from Bangladesh Bank’s own resources.
The World Bank approved financing for FSSP-II to strengthen Bangladesh Bank’s supervisory capacity and systems, modernise its ICT infrastructure, improve the deposit protection system and lay the groundwork for bank resolution and restructuring.
Briefing reporters after the ECNEC meeting, State Minister for Planning Zonayed Abdur Rahim Saki said the project has been designed against the backdrop of serious problems in the banking sector, including a high level of non-performing loans, capital shortages, negative capital in some banks and cyber risks.
“There are high levels of non-performing loans in Bangladesh Bank’s regulated banking system, and there have also been allegations of large-scale money laundering and major incidents of financial looting using digital technology,” he said.
He said the central objective was to establish a continuous digital monitoring and supervision system so that irregularities and emerging risks in banks could be detected quickly.
The state minister said the project would help redesign Bangladesh Bank’s supervisory architecture so that any irregularity could be detected at an early stage and appropriate action, including bank resolution where necessary, could be taken.
“This digitisation will ensure security on one hand and supervision on the other,” he said.
Saki also said the FSSP-II would be integrated with several other government digitisation initiatives to improve interoperability and data sharing.
He said a committee has been formed to work on interoperability among eight projects, including initiatives involving Bangladesh Bank, the Planning Ministry, the Finance Ministry, the National Board of Revenue and the Comptroller and Auditor General’s office.
The objective is to establish systems under which information linked to a citizen’s identification number can be accessed by authorised agencies, while government benefits can be delivered digitally with minimum human intervention, he added.
The state minister said such interoperability would support the delivery of social safety-net benefits and other entitlements directly to citizens while allowing government agencies to access necessary information on citizens in a structured manner.
The World Bank has said FSSP-II will also modernise Bangladesh Bank’s ICT infrastructure to address rising cybersecurity risks and improve data-driven, risk-based supervision of the financial sector.
According to the project document, Bangladesh’s banking and financial sector is facing significant challenges from high NPLs, weak governance, outdated ICT systems, liquidity and capital constraints and emerging cyber and cross-border financial risks.
The project will strengthen Bangladesh Bank’s ICT infrastructure and institutional capacity, improve procurement and provide consultancy support. It will also strengthen the financial-sector safety net through performance-based conditions, enhance the financial capacity of the Deposit Insurance Trust Fund, reduce payment periods and improve bank resolution and restructuring.
Reform of state-owned banks and improvement of their governance and financial stability are also among the project’s objectives.
The project has three major components: strengthening supervisory capacity and systems; strengthening financial-sector safety nets and supporting bank resolution, restructuring and state-owned bank reforms; and providing support for project implementation.
The World Bank said the banking sector’s NPL ratio stood at 32.6 percent at the end of March 2026, while the system-wide capital-to-risk-weighted-assets ratio was negative 2.6 percent at the end of December 2025.