Bangladesh’s banking sector, which should operate as the backbone of the economy, is struggling to regain its footing due to a profound lack of good governance and deepening financial instability.
According to the latest review by Bangladesh Bank, 17 banks failed to generate any net profit in 2024, while 11 banks gave up spending under Corporate Social Responsibility (CSR) altogether in 2025.
Experts view these as a clear sign of the dire state of the industry, fueled by skyrocketing non-performing loans (NPLs), weak boards, and political interference.
Masrur Reaz, Chairman of Policy Exchange Bangladesh and former senior economist at the World Bank, told UNB that the financial health of some banks has revealed the worsening situation of the sector.
He pointed out that these banks will take several years to return to a good financial position. At the same time, the strict policy regulations and skilled management are also required for these banks.
Towfiqul Islam Khan, an economist and the Additional Research Director at the Centre for Policy Dialogue (CPD), said that the scenario was a reflection of the economy of Bangladesh.
The banking sector is like the blood circulation in the financial sector; while banks are in trouble, the overall economy will not be vibrant, he said.
Zero CSR Spending by 11 Banks:
A recent central bank report on CSR activities revealed that 11 banks made no contributions to social welfare in 2025.
These institutions include: Janata Bank, Agrani Bank, BASIC Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, National Bank, Global Islami Bank, Padma Bank, Union Bank, and National Bank of Pakistan.
While CSR funds are typically allocated to sectors like education, health, and climate change, the zero expenditure by these banks suggests they are too preoccupied with internal financial and administrative crises to fulfill their social obligations.
Profitability Crisis:
Meanwhile, the central bank's performance report for 2024 identifies 17 banks that failed to earn a net profit. The list comprises several state-owned and struggling private lenders:
Janata Bank, Agrani Bank, BASIC Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, AB Bank, Bangladesh Commerce Bank, First Security Islami Bank, ICB Islamic Bank, IFIC Bank, National Bank, NRB Commercial Bank, Global Islami Bank, Padma Bank, Social Islami Bank, Union Bank, and National Bank of Pakistan.
Analysts cite high NPLs, unearned interest income, rising operating costs, and irregularities in loan disbursement as the primary drivers of this unprofitability. Many of these banks are now facing such severe capital shortfalls that they struggle to maintain regular business operations.
Interestingly, the report noted that six banks managed to contribute to CSR in 2025 despite recording no profits in 2024, likely by utilizing previous reserves—a move experts warn may challenge long-term stability.
The crisis points toward systemic issues that have plagued the sector for years. The main challenges identified include:
A significant portion of total loans is stuck with large borrowers who continue to enjoy new facilities without repayment.
Political and influential interference in boardrooms often overrides commercial logic.
Lack of profits has led to a sharp decline in Capital Adequacy Ratios (CAR).
Also, reliance on manual systems and outdated software increases operational risks.
Impact on the Economy:
The fragility of the banking sector is casting a long shadow over the national economy. A weak banking system leads to reduced credit flow to industries, hindered investment, and slowed GDP growth.
In 2025, the total CSR expenditure by the banking sector stood at Tk 345.05 crore, with Tk 98.44 crore going to education and Tk 85.64 crore to health. However, the fact that only a few strong banks carry the bulk of this expenditure highlights a massive disparity in financial health across the sector.
Urgent Reforms Needed:
The economists and industry insiders are calling for immediate intervention to stabilize the sector. Key recommendations include:
1. Strict Loan Recovery: Legal action against willful defaulters.
2. Board Accountability: Ensuring transparency and independence in bank management.
3. Digitalization: Modernizing risk management and banking software.
4. Policy Oversight: Strengthening CSR monitoring to ensure it remains a merit-based, profit-driven obligation.
Without swift reformative steps, this deep-seated governance crisis and financial weakness pose a significant risk to the overall economic stability of Bangladesh.