Bangladesh’s financial sector stands at a defining juncture at the end of the 2025, marked by cautious stabilisation efforts but weighed down by deep-rooted structural weaknesses.
While policymakers point to modest macroeconomic improvements and renewed discipline, restoring confidence, reviving private investment and repairing the financial system remain formidable challenges.
From a macroeconomic standpoint, 2025 was largely a year of consolidation rather than acceleration. Inflation stayed elevated for much of the year, compelling authorities to maintain a tight monetary stance.
Although inflationary pressures eased slightly towards year-end, the adjustment came at the cost of slower economic activity.
According to the Bangladesh Bureau of Statistics (BBS), the general point-to-point inflation rate stood at 8.29 percent in November 2025, marginally up from 8.17 percent in October.
Economic growth also fell short of earlier targets, reflecting subdued domestic demand and weak private sector investment.
Both the government and the central bank repeatedly argued that short-term pain was necessary to restore macroeconomic balance and credibility.
The financial sector—particularly the banking system—remained the most critical pressure point throughout the year.
Non-performing loans stayed stubbornly high, underscoring long-standing governance failures, weak credit appraisal and ineffective recovery mechanisms.
Despite repeated reform pledges, defaulted loans continued to erode bank balance sheets, limiting their ability to extend fresh credit.
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Defaulted loans in the country's banking sector reached 34.6 percent of all disbursed credit till June this year, the highest level since 2000, exposing the fragile state of the banking system and renewing concerns about financial governance. Defaults surge to 34.6 percent of credit as Bad loans jump Tk 3,88,573 crore while Irregularities, weak oversight fuel crisis and the State banks hold 44.6 percent defaults.
For much of 2025, banks prioritised liquidity management and survival over risk-taking, further tightening credit conditions for businesses.
In a major intervention, Bangladesh Bank merged five struggling Islamic banks—First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank and EXIM Bank—into a new state-backed entity, tentatively named Sammilito Islami Bank (United Islamic Bank).
The central bank dissolved their boards, appointed administrators and injected government capital to protect depositors and restore confidence, aiming to create a unified and stronger Islamic bank by late 2025 or early 2026.
Private sector credit growth remained one of the weakest indicators in 2025, falling to a four-year low of around 6.23 percent by October, well below the central bank’s target. High interest rates, political uncertainty, power shortages and weak investor confidence discouraged borrowing, stalling new investment and business expansion despite export growth.
High lending rates—often 16–17 percent—combined with stricter collateral requirements, led many entrepreneurs to delay expansion or rely on internal funds. The slowdown in capital machinery imports for much of the year reflected this hesitation.
However, signs of cautious recovery emerged late in the year. Letters of Credit (LCs) for capital machinery rose by about 23 percent in the first quarter of FY2025-26, following three years of decline. During the July–September 2025 quarter, LCs climbed to $471.7 million, up from $383.9 million a year earlier, driven mainly by export-oriented sectors such as textiles, supported by improving foreign exchange stability.
Still, overall private investment remained subdued. Private investment as a share of GDP fell to 22.48 percent in FY2024-25, the lowest in five years, signalling waning confidence at a critical moment as Bangladesh prepares for graduation from Least Developed Country (LDC) status.
Investor sentiment in 2025 was shaped not only by financial conditions but also by broader governance concerns. Businesses frequently cited policy uncertainty, administrative delays and weak contract enforcement as major deterrents. While several reform initiatives were announced, uneven implementation led many local investors to adopt a wait-and-see approach, while foreign investors remained cautious despite Bangladesh’s large market and strategic location.
The capital market offered limited relief. Although there were brief rallies, overall performance failed to attract significant new investment. Volatility, governance issues and limited market depth continued to undermine the stock market’s role as a source of long-term financing.
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On the policy front, Bangladesh Bank emphasised stronger supervision, improved loan classification and better corporate governance. Discussions on bank consolidation and stricter fit-and-proper criteria for directors gained prominence, though scepticism persisted over whether entrenched interests would allow deep reforms to take root.
Meanwhile, the government continued to rely heavily on public investment to support economic activity. Large infrastructure projects played a stabilising role amid private sector hesitation, though economists warned that excessive dependence on public spending could crowd out private investment and raise concerns over efficiency, cost overruns and debt sustainability.
The external sector provided some relief. Remittance inflows remained strong, helping stabilise foreign exchange reserves, while export earnings showed resilience despite global uncertainties.
Bangladesh saw strong remittance inflows in 2025, crossing $30 billion for the fiscal year (FY25) and showing significant growth in the first half of FY26 (July-Dec 2025), reaching over $15 billion with monthly figures like November's $2.89 billion and a record $3.29 billion in March, driven by a stable exchange rate and crackdowns on informal transfers, boosting the economy.
In the July-November period, remittance Inflows reached approximately $13.03 billion, a significant jump from $11.13 billion the previous year. In November 2025, A robust $2.89 billion, up over 31% from November 2024 while in March 2025, a record monthly inflow of $3.29 billion.
Export receipts exceeded $20 billion in the first half of FY2025-26, driven mainly by the apparel sector. For FY2024-25, total exports reached $48.28 billion, with RMG earnings at $39.34 billion.
As 2025 ends, there is cautious recognition that stabilisation has been achieved, but there is broad agreement that the hardest work lies ahead. Restoring trust in financial institutions, curbing loan defaults and ensuring predictable policy implementation are essential to unlocking private investment.
Without decisive reforms, growth is likely to remain below potential, limiting Bangladesh’s ability to absorb its growing labour force—especially as concessional financing and trade preferences diminish after LDC graduation.
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In that sense, 2025 may be remembered as a transitional year—highlighting both the resilience of Bangladesh’s economy and the depth of its structural weaknesses.
Whether this adjustment phase evolves into a foundation for sustainable and inclusive growth will depend largely on how effectively financial sector reforms are implemented and private sector confidence is restored in the years ahead.