The government has launched sweeping reforms to overhaul Bangladesh's troubled banking sector, aiming to restore depositor confidence and bring transparency to a system plagued by years of misgovernance and corruption.
Finance Adviser Dr. Salehuddin Ahmed outlined the reforms in his national budget speech for FY 2025-26 on Monday, detailing measures already underway and others in the pipeline.
He said the previous government had severely undermined the financial sector through rampant embezzlement, unchecked corruption, and politically driven loan rescheduling that masked the true scale of non-performing loans (NPLs).
To address this, the new administration has adopted the Loan Lease Classification and Provisioning System in line with international Basel III standards. As a result, the official NPL ratio jumped from 10.11 percent in June 2023 to 20.20 percent by December 2024, reflecting a more accurate assessment of the sector's health, according to the finance adviser.
"Years of cosmetic accounting practices and regulatory forbearance allowed the problem to fester," Dr. Ahmed said, noting that efforts are now underway to uncover the actual condition of banks through a comprehensive Asset Quality Review (AQR).
He accused the former regime of pushing the sector to the brink of collapse over the last 15 years, during which "millions of crores of taka were siphoned off from bank deposits."
In response, the government has begun restructuring bank leadership and strengthening regulatory tools. Several bank boards have already been reconstituted, and the Bank Resolution Ordinance, 2025 has been enacted to allow swift intervention in cases of capital shortfall, liquidity crisis, insolvency, or other systemic risks.
Additionally, amendments to the Bangladesh Bank Ordinance, 1972 are underway, alongside efforts to introduce a new Weak Asset Management Law, which would allow for more effective handling of distressed banking assets.
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