Banking sector reforms have been discussed for years, yet the sector remains burdened by insider lending, bad loans, low capitalization, weak governance, and inadequate automation. The sector also suffers from a lack of skilled manpower and an inability to offer products that meet the evolving demands of clients.
Recent upheavals since the fall of the last regime have highlighted the fragility of the banking sector. The resignation of the Bangladesh Bank (BB) governor and other top officials, along with conflicts at several banks, including Islami Bank, underscore how quickly the sector can unravel under pressure.
Numerous media outlets, civil society forums, and development partners have repeatedly exposed the root causes of this crisis. They have criticized BB’s questionable actions, such as providing collateral-free liquidity support to failing banks, unethical ties between BB officials and loan defaulters, and forced ownership changes in banks like Islami Bank, which have eroded trust.
BB’s practice of lending foreign currency loans through the Export Development Fund (EDF) without proper evaluation has further exacerbated the problem, leading to many classified loans. The staggering Tk 1.822 trillion in default loans is likely even higher, with estimates suggesting it could be closer to Tk 4 trillion when including rescheduled, written-off, and disputed loans.
As depositors struggle to withdraw their savings, bank owners continue to secure loans through dubious means. Allegations that many irregularities have escaped BB and Bangladesh Financial Intelligence Unit’s scrutiny raise serious ethical concerns about the leadership of both the central bank and commercial banks.
The new leadership, including a newly appointed governor and deputy governors, must prioritize a thorough investigation into the true extent of default loans, hold major defaulters accountable, and safeguard depositors’ interests. The government must urgently address political interference, manipulative accounting, nepotism, and lack of transparency in the sector. Alongside immediate reforms, a comprehensive and strategic overhaul of the banking sector is essential to align it with global standards and ensure its inclusivity and competitiveness.
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