United News of Bangladesh

Agricultural loan disbursement in Bangladesh has slowed down, with banks disbursing Tk 3,639 crore less than the target of Tk 28,500 crore during the first nine months of the current fiscal year 2024–25. According to the latest agricultural loan update from Bangladesh Bank, banks disbursed a total of Tk 24,861 crore over the 9-month period—around Tk 3,639 crore short of the agricultural loan disbursement target. Among the banks, two failed to disburse any agricultural loans during this period, while nine banks disbursed less than one-third of their respective targets, according to the central bank report. Commercial banks are required to allocate 2 percent of their total loan disbursements to the agriculture sector. Accordingly, the target for FY 2024–25 was set at Tk 38,000 crore. During the July to March period, banks were expected to disburse 75 percent of the annual agricultural loan target. However, only 65 percent had been disbursed by March. Private banks, in particular, have fallen behind, disbursing Tk 14,727 crore against a target of Tk 19,390 crore. In contrast, state-owned banks have slightly exceeded their targets. Since the beginning of the fiscal year, loan demand in banks has remained low, attributed to political unrest and efforts to oust the government. Following Sheikh Hasina’s fall on 5 August, a reform drive in the banking sector was initiated. CIB report mandatory for agricultural loans: Bangladesh Bank "Since the beginning of the current fiscal year, the demand for loans in banks has been low due to political uncertainty. At that time, banks adopted a cautious approach to loan distribution," said the Managing Director of a private bank, requesting anonymity. He added that Bangladesh Bank’s policy of curbing inflation by raising interest rates and reducing money supply has also had an impact on loan disbursements. Dr Jahangir Alam, a renowned economist specialising in agricultural and rural development, told UNB that the reduced loan flow to other sectors, including industry, trade and services, also negatively impacted agricultural loans. "As a result, agricultural loan also took a hit. But the priority of financing in the field of food security was ignored," he said. He noted that a strategy to increase agricultural loan had been determined some time ago to ensure food security. As part of that plan, banks were mandated to allocate 2 percent of their total loans to agriculture, Jahangir Alam said. He urged that special attention be given to enhancing agricultural loan disbursement to safeguard food security and reduce dependence on food imports. Banks without rural branches typically distribute agricultural loans through microfinance organisations (NGOs) registered with the Microcredit Regulatory Authority (MRA), a government regulatory body. Agricultural Loans in Bangladesh: Banks Offering Loans to Farmers and Farms Banks failing to meet their agricultural credit distribution targets will face penalties, according to Bangladesh Bank, which is monitoring the matter. Locally owned Padma Bank and foreign-owned Woori Bank have yet to begin agricultural loan disbursement for the fiscal year. Union Bank has disbursed only 5.31 percent of its target. First Security Islami Bank and IFIC Bank have disbursed 13 percent each, Madhumoti Bank also 13 percent, while Shahjalal Islami Bank, Mutual Trust Bank, and Social Islami Bank have each disbursed 23 percent. Southeast Bank has disbursed 16 percent. Among foreign banks, HSBC has disbursed only 9 percent. Despite the relatively low loan volumes, foreign-owned Standard Chartered Bank, Bank Alfalah, State Bank of India, and Habib Bank have all achieved their annual agricultural loan disbursement targets within the first nine months.

Bangladesh Bank has instructed all scheduled banks to adhere to best practices in processing payments against Letters of Credit (LCs). In a recent notification, the central bank also allowed banks to consider defective import bills as eligible for payment, provided importers can present logical justification for accepting the errors. It, however, emphasised that banks must ensure the acceptance of such bills does not lead to any change in the nature of the imported goods. The directive comes amid reports that several local banks are declining to settle import bills with foreign banks, citing defects in documentation. This trend has been affecting the commercial relations between Bangladeshi and foreign banks, the notification noted. Expatriates sent $1.78 billion in remittances in first 19 days of April To address this, Bangladesh Bank has urged domestic banks to align their practices with international standards in settling import payments. The central bank further instructed banks to exercise caution when issuing delivery orders against import bills received through importers. Previously, banks were allowed to make payments against defective bills or bills received directly by importers, but only after submission of the bill of entry following customs clearance. Business leaders have long complained that despite receiving defective import bills, banks often refused payment, forcing foreign suppliers to wait until the goods were released, exposing them to financial risks. The new directive is expected to reduce confirmation charges and interest rates on import loans, ultimately helping to lower overall import costs.

Bangladesh Bank has instructed all banks to submit comprehensive information on wilful defaulters in a separate format. “It is mandatory to include all relevant details, including the names and identities of wilful defaulters,” the central bank stated in its directive. The Banking Regulation and Policy Department of Bangladesh Bank issued the notification with immediate effect on Wednesday. Banks are required to submit information to the Credit Information Bureau (CIB) of Bangladesh Bank every quarter. Previously, a similar directive was issued on March 12, 2024, which asked banks to report on the actions taken against wilful defaulters. The latest directive introduces further amendments regarding the reporting process. BNP urges US to keep tariffs on Bangladesh at reasonable level According to the new circular, three specific instructions have been outlined for reporting wilful defaulters to the central bank: First, once banks identify and finalise wilful defaulter borrowers, their details must be submitted to the CIB of Bangladesh Bank. These borrowers should be categorised as ‘wilful defaulters’ in the CIB records. Second, banks must submit consolidated data on wilful defaulters in a statement on a quarterly basis. This report should also be submitted to the Banking Regulation and Policy Department by the 10th day of the month following the end of each quarter. All relevant documents must accompany this submission. Third, the names, mobile numbers, and e-mail addresses of the members of each bank’s identification unit responsible for handling wilful defaulter cases must also be provided.

Bangladesh Bank (BB) Governor Dr Ahsan H Mansur on Friday said recovering money laundered abroad is a complex process and may take up to a year, even though the government has made it a top priority to trace and seize assets siphoned abroad. Speaking at a views-exchange meeting with the media on “Anti-Money Laundering Measures and Contemporary Banking Issues” at the central bank’s Chattogram office, he alleged that several families siphoned off between Tk 2.5 lakh crore and Tk 3 lakh crore over the past 15 years, during the tenure of the previous government. “The government has set a target to seize these assets within the next six months to a year. Foreign investigative agencies and law enforcement are already working with us in this effort,” the governor said. He also said the country’s overall economic indicators are showing signs of improvement. “Remittance inflow has increased by 26-27 per cent, exports are on the rise, and we now have reserves enough to cover four months of imports. Except for inflation, which has yet to come down to a desired level, we are in a comfortable position overall,” he added. The cenbank chief also stressed that preventing money laundering is more crucial than recovering laundered funds. “That’s why, the government will reform the necessary laws.,” he said. Asked whether any officials of Bangladesh Bank were involved in money laundering and actions taken against them, Dr Mansur said, “If there is concrete evidence against any official, legal action will be taken. Cases have already been filed against some individuals and actions are being taken as per the law.” Accountability key to resolving Rohingya crisis: Dhaka He added that if any government agency investigates a central bank official, Bangladesh Bank will cooperate fully. The governor also responded to concerns raised over allegations that employees of the private United Commercial Bank (UCB) had Tk 3 to 5 lakh each deducted from their provident fund accounts for Mujib Borsho celebrations. He said, “There were irregularities and corruption in many forms over the last 15 years. All such irregularities are being investigated. If any bank has unlawfully deducted money from employees, it will also be investigated.”

Bangladesh Bank Governor Dr Ahsan H. Mansur said all Islamic banks will be merged into two entities. He said, ‘political interference in banks will be stopped so that no one can establish a reign of loot.’ He said this at the 10th Annual Banking Conference at BIBM at Mirpur on Wednesday. The governor said, ‘Both banks and non-bank financial institutions need reforms because of irregularities, scams and failure of good governance.’ Foreign investors express keen interest in Bangladesh: BIDA For this, after the political change on August 5 last year, Bangladesh Bank took the initiative to form a task force, introduce new laws and amend existing laws such as the Bank Companies Act, he pointed out. As a result, some of the looted banks have started to turn around, but several banks are in a state of collapse, said  Mansur. Noting that the condition of all banks is not bad, but the condition of those that are bad is very bad, he said. The governor said, "No one will be allowed to escape by looting bank money and political interference in banks will be stopped." He also said, "The central bank will intervene in the bank board in the interest of the customers and the board of another bank will be dissolved in the next few weeks.”

Bangladesh Bank has delivered positive news regarding the country’s foreign exchange reserves, as it surpassed $25 billion before the end of March, following a record inflow of remittances this month. According to data released by the central bank on Thursday (March 27), the country’s gross reserves have risen to $25.44 billion. Bangladesh Bank re-fixed MFS transaction limit This comes after a significant increase in remittance inflows, which reached $2.94 billion in the first 26 days of March – the highest for any month in the country’s history. However, as per the International Monetary Fund (IMF) methodology under the Balance of Payments and International Investment Position Manual (BPM6), Bangladesh’s net reserves currently stand at $20.29 billion. The net reserve figure is calculated by deducting short-term liabilities from the gross reserves. On March 9, Bangladesh paid $1.75 billion to settle import bills through the Asian Clearing Union (ACU), which temporarily reduced the gross reserves to below $25 billion and the net reserves to below $20 billion. Remittance inflow surges amid forex reserve crisis After this payment, the country’s reserves under the BPM6 standard had dropped to $19.75 billion but have since rebounded above the $20 billion mark. The surge in remittances has played a crucial role in replenishing the reserves, providing much-needed relief to the economy ahead of Eid. Central bank officials remain optimistic that continued inflows will help stabilise the foreign exchange reserves further. Speaking to the media, Bangladesh Bank’s spokesperson and Executive Director, Arif Hossain Khan, confirmed the latest reserve figures and expressed confidence in the country's external financial position. NBR preparing stricter tax exemption policy With the upcoming Eid festivities, the record remittance inflows have brought a timely boost to the economy, offering a sense of optimism amidst ongoing financial challenges.

Bangladesh Bank has allowed Bangladeshi startup businesses to invest up to US$ $10,000 or equivalent foreign currency to form a single company abroad. According to a circular issued by the central bank on Thursday, startup businesses in Bangladesh can send $10,000 to form a single company abroad. This permission has been granted under the Foreign Exchange Control Act, 1947. As a result, the resident companies can now send remittances to establish companies abroad by applying to the bank. Banks asked to shore up online services, keep ATMs full and secure before 9-day holiday According to the circular, Bangladeshi citizens at the individual level have been allowed to establish companies abroad in the same manner. In this case, the applicants must have innovative ideas, which will create opportunities for investment and income in Bangladesh, including expanding their business abroad. In addition to small-scale investments, Bangladesh Bank has allowed resident companies to invest abroad by swapping their own shares/securities with those of foreign companies. Bangladesh Bank lifts ban of foreign tour for NBFIs In this method, there will be no need for cash to invest abroad. In this system, when considering investment proposals abroad, the swap ratio of shares/securities must be consistent with global best practices, said the central bank circular.  

The Bangladesh Bank has lifted the ban on foreign travel by officers and employees of Non-Bank Financial Institutions (NBFIs). The Financial Institutions and Markets Department of Bangladesh Bank issued a directive in this regard on Monday. The directive states that a circular was issued on May 29, 2022, asking officers and employees of finance companies to stop traveling abroad to participate in training, study tours, exposure visits, meetings and seminars. Under the new directive, officers and employees of finance companies can travel abroad with the approval of the appropriate authorities in accordance with the relevant policies of their own organizations for essential foreign travel. However, officers and employees of finance companies who have separate instructions from Bangladesh Bank regarding foreign travel must comply with the provisions of the relevant directives.

Initiatives are underway to enhance Bangladesh Bank’s authority in resolving troubled banks and stabilising the financial sector, officials said. Several weak banks are deteriorating further due to liquidity being tied up with industries linked to the S Alam Group, which has almost defaulted. Bangladesh Bank, the country’s central bank, recently disclosed that approximately Tk 3.45 lakh crore in loans have defaulted within the banking sector. This figure is expected to rise further once the assets of these weak banks are assessed. A significant portion of the defaulted loans belongs to troubled banks. The central bank has already appointed auditors to evaluate the asset quality of these institutions to determine their future. Election Commission rejects 20 reform proposals citing threat to authority A new law is being introduced to manage the country’s struggling banks, which may involve mergers or liquidations. To this end, Bangladesh Bank has finalised the draft of the Bank Resolution Ordinance 2025, which will grant the central bank the authority to oversee financial institutions, including banks. Bangladesh Bank Governor Dr Ahsan H Mansur recently stated that Bangladesh had witnessed one of the world's largest banking sector scams due to the abuse of state power, leading some banks to the brink of collapse. He explained that auditors—both domestic and international—are conducting assessments in consultation with the World Bank. Once the asset evaluations are completed, Bangladesh Bank will decide the fate of these banks. Dr Mansur said, “We do not yet know the true quality of the assets held by some troubled banks. However, a preliminary investigation suggests that over 80% of their loans were issued to a single group, while the remaining deposits were allocated to benefit the same group’s affiliates.” He pointed out that some banks would struggle to survive as their liabilities exceed their assets. Restoring Trust in the Banking Sector Dr Mansur emphasised the need to restore public trust in banks, stating that Bangladesh Bank will take all necessary measures to achieve this. A central bank official noted that most troubled banks are relying on loans from Bangladesh Bank, as their recovery rate is alarmingly low. These banks issued loans in violation of standard banking regulations, leading to their inability to recover despite liquidity support from the central bank. What Lies Ahead for Troubled Banks? A new law is being introduced to manage the country’s weak banks, potentially involving mergers or liquidations. Bangladesh Bank has finalised the Bank Resolution Ordinance 2025, which was recently published on the Financial Institutions Division’s website, inviting feedback from stakeholders. The draft ordinance states that Bangladesh Bank must be granted resolution powers to ensure financial stability by safeguarding depositors’ interests and addressing capital or liquidity risks, insolvency, or threats to a bank’s existence. Consequently, efforts are underway to finalise this law. Surge in substandard products in Bangladesh exposes gaps in govt oversight The ordinance also specifies that in the event of a conflict with existing laws, its provisions will take precedence. Under the ordinance, a 'bridge bank' will be established to manage struggling financial institutions. This entity, created by Bangladesh Bank, will oversee the operations of a failing bank to maintain uninterrupted banking services throughout the resolution process. The bridge bank will ensure the continuity of essential banking functions while addressing financial instability until the troubled banks undergo merger, liquidation, or other necessary restructuring. The draft ordinance highlights several key objectives, including: Protecting depositors' funds Minimising government financial assistance Preventing the depreciation of bank assets Reducing creditor losses Ensuring overall financial sector stability When Bangladesh Bank decides to resolve a scheduled bank, it will issue a formal notification and implement the resolution mechanism under this ordinance. The proposed legislation empowers the central bank to transfer shares, assets, and liabilities of the resolved bank to a third party. Current Weak Banks in Bangladesh As of November 2024, the following banks have been identified as weak: First Security Islami Bank’s Islami Bank Bangladesh PLC Social Islami Bank Union Bank Global Islami Bank Second report of committee to reform NBR expected next month, focusing on automation National Bank Exim Bank ICB Islami Bank Bangladesh Commerce Bank NRB Bank Padma Bank Among these, Islami Bank Bangladesh PLC has shown signs of recovery, benefiting from a large customer base and strong public support. The bank has regained customer confidence domestically and internationally, as evidenced by its leading position in remittance inflows. Causes Behind the Failure of Weak Banks High levels of bad debt Insufficient liquidity Weak management Financial irregularities and corruption Inability to compete in the market A bank is classified as weak when its liquidity or solvency is compromised. This can occur if its financial resources, risk profile, or business model deteriorates significantly. Dr Selim Raihan, a professor of Economics at the University of Dhaka and Executive Director of the South Asian Network on Economic Modelling (SANEM), pointed out that banking sector reforms have taken place worldwide, including in the United States. "As per global practice, weak banks can be merged and in some cases, multiple troubled banks are consolidated under a stronger institution for better management. This has happened in Bangladesh before, particularly after independence," he said.

Several financially strained banks have sought additional liquidity support from Bangladesh Bank to meet the surge in cash withdrawals ahead of Eid-ul-Fitr. According to central bank sources, at least six banks have requested Tk 5,000 crore in liquidity assistance to cope with the increased demand. But the central bank has advised them to borrow from financially stable banks under the Bangladesh Bank guarantee scheme. Bangladesh Bank reconstitutes boards of three private banks Meanwhile, First Security Islami Bank, Global Islami Bank, Social Islami Bank, Union Bank and National Bank have signed agreements with Bangladesh Bank to secure loans under this scheme. Following the change of government in August 2024, Bangladesh Bank provided Tk 29,000 crore in liquidity support to nine banks. As per the central bank’s records: Social Islami Bank (SIBL) received Tk 5,500 crore First Security Islami Bank received Tk 6,500 crore National Bank received Tk 5,000 crore Union Bank received Tk 2,000 crore Global Islami Bank received Tk 2,000 crore Exim Bank received Tk 8,500 crore Bangladesh Commerce Bank received Tk 200 crore ICB Islami Bank received Tk 100 crore AB Bank received Tk 200 crore