The Bangladesh Association of Banks (BAB), an apex body representing bank sponsor-directors, on Sunday welcomed the proposed budget for fiscal year 2026-27.
The association also pledged its full cooperation with the government in implementing the budget agenda, presented in Parliament by Finance and Planning Minister Mr. Amir Khosru Mahmud Chowdhury on Thursday.
In a statement, the BAB termed the proposed a significant step towards restoring stability in the financial sector, hailing the government's decision to allocate around Tk 400 billion for the recapitalisation of weak banks.
The association also welcomed the introduction of a risk-based supervisory framework aligned with international standards on capital adequacy and corporate governance, the commitment to eliminating political interference in banking, and plans to develop corporate and municipal bond markets to ease pressure on the banking system.
The increase in the excise-duty exemption threshold on deposits to Tk 400,000 and the rationalisation of excise duty into a single charge per loan facility will benefit both depositors and borrowers, it said.
The BAB further lauded the Tk 600 billion stimulus package, which includes a 6.0 per cent interest subsidy, as well as measures aimed at improving the investment climate through easier dividend repatriation, simplified trade procedures and single-window investment services.
The BAB also welcomed the government's decision to rely more on external borrowing to finance the budget deficit, arguing that such a strategy could help reduce pressure on domestic credit markets.
The association said its member banks stand ready to support the government's economic agenda through stimulus financing, funding for economic zones and export-oriented industries, and the expansion of digital financial services.
It, however, stressed that recapitalisation efforts must be accompanied by strong recovery measures, including the swift recovery of misappropriated assets, strict action against wilful defaulters and transparent handling of irregular shareholdings.
BAB also said a dedicated budgetary allocation should have been made for establishing an Asset Management Company (AMC) to help weak banks lessen non-performing loans and strengthen their balance sheets.
The association urged the government to ensure that the proposed bank resolution framework should contain safeguards preventing individuals responsible for the distress of financial institutions from regaining influence in the sector.
BAB also said the proposed bank resolution framework should contain safeguards so that individuals whose conduct contributed to the distress of financial institutions cannot re-enter the system.
It also raised concern that the government's planned borrowing of Tk 1.12 trillion from the banking system could further constrain private-sector credit, which is already growing at a historic low rate.
On taxation, the BAB argued that publicly listed banks should be taxed on the same basis as other listed companies and called for a medium-term roadmap to reduce the current 37.5 per cent corporate tax burden on banks.
The association further sought tax relief for weak banks in order to allow them to rebuild capital, meet provisioning requirements and strengthen financial resilience.
BAB also called for withdrawal of taxes that discourage institutional investment in the stock market, including taxes on dividend income earned from listed securities and the additional 10 per cent tax on stock dividends issued to meet regulatory capital requirements.
Besides, the association proposed that loan-loss provisions and provisioning shortfalls be excluded from taxable income in the future, arguing that banks should not be taxed on income absorbed by regulatory capital and provisioning requirements.
To support the government's digitalisation agenda, the BAB urged the authorities to exempt banking technology, software, hardware, payment infrastructure and cybersecurity investments from levying duties and taxes.
jasimharoon@yahoo.com