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Bangladesh Bank expects visible improvements in the financial condition of the country’s banks by March-April 2027 as it steps up reforms to tackle non-performing loans (NPLs), capital shortfalls, weak governance and risk-management deficiencies.

“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 on Wednesday.

He made the remarks at the inaugural session of the 11th Annual Banking Conference 2026, organised by the Bangladesh Institute of Bank Management (BIBM).

The central bank’s first phase of reforms focused on rebuilding foreign exchange reserves, settling outstanding external liabilities and maintaining exchange-rate stability. The target of building reserves sufficient to cover nearly six months of import payments has been achieved, he said.

The focus has now shifted to restoring the banking sector’s financial health. Asset quality reviews are being conducted to determine banks’ actual financial condition and rebuild confidence among depositors and investors.

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

The banking sector’s NPL ratio, which stood at 36 per cent in December 2025, has fallen to 31 per cent, according to Habibur Rahman. He expects the ratio to decline further by December.

He said the Money Loan Court Act and the new Special Asset Management Act would help accelerate recovery of defaulted loans.

Addressing capital shortfalls is another major priority. Bangladesh Bank is working with the Finance Ministry to strengthen the financial capacity of both state-owned and private banks facing capital deficiencies.

“If the planned measures are implemented as intended, visible improvements in banks’ financial conditions are expected by March-April 2027,” he said.

Habibur Rahman stressed that restoring the sector would require stronger governance and more disciplined lending. Bank boards must make independent decisions, while management should be held accountable and risk-management and compliance functions given effective authority.

He urged banks to assess borrowers based on repayment capacity, cash flows and realistic business prospects rather than influence or personal relationships. Proper loan classification, adequate provisioning, sound capital planning and regular stress testing are also essential.

Banks should test their ability to withstand simultaneous shocks, including falling export orders, higher energy costs, exchange-rate volatility and deposit withdrawals.

The central bank is also preparing a Bank Restructuring and Resolution Fund to help resolve weak banks and financial institutions without placing excessive pressure on government finances.

Habibur Rahman said Bangladesh Bank was also working to modernise the financial system through greater use of technology, performance-based management and wider cashless transactions.

Alongside existing systems such as BEFTN, RTGS, NPSB and Bangla QR, an inclusive payment system is planned for next year to make person-to-person digital transactions easier.

Corporate restructuring and related risk-management measures are also being planned to prevent financial distress at large corporate groups from spreading across multiple banks.

The central bank is additionally working on a Tk60,000 crore package by rearranging existing assets and financing within the financial system, with the aim of supporting recovery without creating excessive inflationary pressure.

Habibur Rahman said the broader objective was to build a banking system capable of supporting Bangladesh’s entrepreneurs, skilled workforce and economic potential while protecting depositors and strengthening financial inclusion.

The conference was attended by economist Dr Wahiduddin Mahmud as chief guest, along with World Bank Bangladesh and Bhutan Division Director Jean Pesme, Bangladesh Association of Banks Chairman Mohammad Abdul Hai Sarker and City Bank Managing Director and CEO Mashrur Arefin, among others.