Banking sector recovery expected by March-April 2027: BB

"The central bank is prioritising control of non-performing loans (NPLs), assessment of asset quality, addressing capital shortfalls, strengthening corporate governance and improving risk management," said BB Deputy Governor Dr Md Habibur Rahman today.

He made the remarks while speaking as a special guest at the inaugural session of the 11th Annual Banking Conference (ABC) 2026, organised by the Bangladesh Institute of Bank Management (BIBM).

Renowned economist and former interim government adviser Dr Wahiduddin Mahmud, a former professor of economics at Dhaka University, attended the programme as the chief guest.

Other special guests included Jean Pesme , World Bank Division Director for Bangladesh and Bhutan; Mohammad Abdul Hai Sarker, chairman of the Bangladesh Association of Banks (BAB) and Dhaka Bank PLC; and Mashrur Arefin, managing director and CEO of City Bank PLC and chairman of the Association of Bankers, Bangladesh Limited (ABB).

Dr Habibur Rahman said the first phase of measures to address the banking sector's challenges focused on rebuilding foreign exchange reserves, settling outstanding external liabilities and maintaining exchange rate stability.

The target of building foreign exchange reserves sufficient to cover nearly six months of import expenditure has also been achieved, he said.

Drawing lessons from the global financial crisis and the Southeast Asian financial crisis, he said, the central bank is prioritising financial stability, in line with the approach adopted by central banks in other countries. 

An initiative has also been taken to amend the Bangladesh Bank Order to strengthen the central bank's role in maintaining financial stability, he added.


Explaining the ongoing banking reforms, the deputy governor said asset quality reviews were being conducted to assess banks' actual financial conditions and restore confidence among depositors and investors.

The reviews have already been completed in 15 banks, while assessments of the remaining banks are progressing with support from the World Bank, he said.

The banking sector's non-performing loan ratio, which stood at 36 percent in December 2025, has declined to 31 percent, he said, expressing hope that it would fall further significantly by December this year.

The Money Loan Court Act and the new Special Asset Management Act would help accelerate the recovery of defaulted loans, he added.

Restoring the financial capacity of state-owned and private banks facing capital shortfalls is another major priority of the central bank, Dr Habibur Rahman said.

The central bank is working with the Finance Ministry on the issue. If the planned measures are implemented as intended, visible improvements in banks' financial conditions are expected by March-April 2027, he said.

He noted that conventional policies alone might not always be sufficient to address a financial crisis, making exceptional measures necessary in certain circumstances.

During the 2008 global financial crisis in the United States, liquidity support and government investment were used to help banks and financial institutions recover. Bangladesh is also focusing on improving banks' financial health, governance and transparency after containing risks, he said.

The deputy governor stressed the need for independent decision-making by bank boards, accountability of management and effective authority for risk management and compliance departments.

He urged banks to make lending decisions based on borrowers' repayment capacity, cash flows and realistic business prospects rather than influence or personal relationships.

Proper loan classification, adequate provisioning and sound capital planning are also essential to restoring discipline in the banking sector, he added.

Dr Habibur Rahman emphasised regular stress testing to strengthen banks' liquidity and capital management.

Banks must assess their capacity to withstand simultaneous shocks, including declining export orders, rising energy costs, exchange rate fluctuations and pressure from deposit withdrawals, he said.

He also called for stronger cybersecurity, measures to prevent digital fraud and improved capacity to ensure uninterrupted customer services.

The central bank is taking an initiative to establish a 'Bank Restructuring and Resolution Fund' to address the problems of weak banks and financial institutions.

The proposed fund would provide an effective and cost-efficient mechanism for resolving distressed institutions without increasing dependence on government funds, he said.

The deputy governor also stressed the need to modernise the central banking system to harness regional economic opportunities.

Initiatives are underway to expand the use of technology in banking, establish performance-based management and promote cashless transactions, he said.

Alongside the existing Bangladesh Electronic Funds Transfer Network (BEFTN), Real Time Gross Settlement (RTGS), National Payment Switch Bangladesh (NPSB) and Bangla QR systems, an inclusive payment system is planned for introduction next year.

The proposed system would make person-to-person digital transactions easier, he said.

Corporate restructuring and related risk management have also been included in future plans to prevent financial distress at large corporate groups from adversely affecting multiple banks.

He further said an initiative was underway to implement a Tk 60,000 crore package by rearranging existing assets and financing within the financial system, without creating excessive inflationary pressure.

Addressing researchers, academics and bankers, Dr Habibur Rahman underscored the importance of evidence-based policymaking, improving loan quality and expanding safe financial inclusion.

He called for continuous monitoring by policymakers, effective resolution of problems in weak institutions and measures to protect depositors' interests.

Banks, meanwhile, must ensure good governance, identify risks at an early stage and provide fair and quality services to customers, he said.

Expressing optimism about the country's economic prospects, the deputy governor said the main objective was to build a banking system capable of harnessing Bangladesh's skilled workforce, entrepreneurs and economic potential, reports BSS.