United News of Bangladesh

The World Bank Board of Executive Directors on Wednesday approved $450 million in financing to help Bangladesh strengthen the foundations for a stronger banking sector, a prerequisite for the revival of the country’s economic growth and job creation. The Financial Sector Support Project II aims to bolster the deposit protection system to protect small depositors and build Bangladesh Bank’s supervisory capacity and systems. It will also support the deposit protection fund by increasing its capital and advance key reform priorities, including enhancing the deposit protection system, establishing an effective Emergency Liquidity Assistance framework, developing bank restructuring strategies, and supporting reforms in state-owned banks, said a press release. The banking sector faces significant challenges caused by weak corporate governance, regulatory capture, and related-party lending. The non-performing loan (NPL) ratio stood at 32.6 percent as of the end of March 2026, well above the average for South Asian banks of 7.9%, and the system-wide capital-to-risk-weighted assets ratio was negative 2.6 percent as of the end of December 2025. “Bangladesh’s vision of attaining a trillion-dollar economy requires a stable and inclusive financial sector. But the banking sector—which accounts for about 90 percent of total financial sector assets—faces mounting stress,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan. “This project will help Bangladesh put in place a set of essential tools, systems, and safeguards needed to protect small depositors and support confidence, restore stability in the banking sector, allowing it to support economic growth and job creation.” It will upgrade and modernise Bangladesh Bank’s Information and Communications Technology (ICT) infrastructure, helping address rising cybersecurity risks and close critical gaps in sector-wide data and analytics. This will improve Bangladesh Bank’s ability to monitor risks, enhance data-driven and risk-based supervision, and improve the resilience of the financial sector. “The project, which forms part of a coordinated approach by development partners including the IMF and the Asian Development Bank, supports measures to bolster crisis preparedness and build the authorities’ capacity to manage banking sector stress,” said Toshiaki Ono, World Bank Senior Financial Sector Specialist and Task Team Leader of the project.

Bangladesh’s banking sector has managed to pull back from the brink over the past year, Bangladesh Bank Governor Ahsan H Mansur said on Sunday, crediting a series of measures taken since he assumed office. Speaking at a seminar titled 'Interim Government’s 365 Days' organised by Centre for Policy Dialogue (CPD), the governor said the sector was “right at the edge of the cliff” when the interim government took office in August last year. “Our two main challenges were to stabilise the macroeconomy and reform the financial sector. Reforms cannot be done in a year, but we have started them in every area,” Mansur said. Upon taking charge, he held meetings with international financial institutions to maintain lines of credit. “We assured them that we would repay every penny we owed, and we did. Our situation did not turn like Sri Lanka or Pakistan,” he said. According to him, the biggest support in debt repayment came from remittance inflows alongside export earnings over the past year. On inflation, the governor said controlling it was a major challenge. Since August 14 last year, Bangladesh Bank has not sold a single dollar from reserves, instead buying dollars at Tk 122 despite pressures to adjust the rate. Bangladesh Bank tightens monetary policy further, aims to curb inflation Inflation has since fallen below 10%, and Mansur expects it to drop below 5% in the future. While the balance of payments is now in surplus, the economy is still lagging in attracting investments, he noted. “Before elections, big investors will not come, but we have already prepared the ground to encourage investment after the polls,” he added. On why no banking commission was formed, Mansur said it would have delayed urgent decisions, taking six to nine months to produce a report. Instead, three separate taskforces have been formed to reform the banking sector, central bank operations, and recover laundered money. Recovering funds siphoned abroad is proving the most challenging, he said, as it requires coordination with 8–10 ministries. Major legal reforms are also underway, including extensive amendments to the Bank Companies Act, fundamental changes to the Money Laundering Act — adding asset recovery provisions — and broad revisions to the Bangladesh Bank Order to enhance the central bank’s accountability and autonomy. Amendments will also be made to the Deposit Insurance Act and the Money Loan Court Act to resolve long-pending loan default cases. The central bank also plans to amend the Bangladesh Bank Resolution Ordinance to allow it to acquire any bank facing liquidity crises due to irregularities. “No more leniency. If a bank cannot operate properly, Bangladesh Bank will take it over,” Mansur warned. Bangladesh Bank buys $10 million through auction to boost taka He added that a single body will be created for “360-degree monitoring” of all banks to tackle irregularities in a coordinated manner. The governor further stressed initiatives to make Bangladesh a cashless economy, including the promotion of QR codes, wider credit card usage, expansion of nano-loans, banking education for school students, Tk 200 student bank accounts, housing reforms, revenue department restructuring, and lowering smartphone prices to expand digital banking coverage.