Written by The Banking Post
The resilience and credibility of Bangladesh’s banking sector will be decisive for the country’s economic future as it moves toward upper-middle-income status, the International Chamber of Commerce-Bangladesh (ICCB) said in its latest quarterly bulletin.
Describing the banking system as the backbone of the economy, the ICCB noted that banks play a central role in mobilising savings, financing trade and supporting employment. But it warned that the sector is now at a critical juncture, burdened by deep structural weaknesses that demand urgent governance reforms and a strong, independent central bank.
At the top of the risk list is the surge in non-performing loans. According to the ICCB, defaulted loans have climbed to more than Tk 6.44 lakh crore, accounting for about 35.7 per cent of outstanding credit—an alarmingly high ratio by international standards.
Such elevated bad loans weaken bank balance sheets, constrain new lending and deter investment, ultimately posing broader macroeconomic risks, the report said.
While recent regulatory steps have improved the reporting of defaulted loans, the ICCB stressed the importance of distinguishing willful defaulters from borrowers facing genuine business distress. It argued that deliberate financial misconduct must be addressed firmly, while viable firms should receive appropriate restructuring support.
The editorial also highlighted the recently enacted Bank Resolution Ordinance 2025, described as the largest reform of its kind in Bangladesh’s financial history. Under the new framework, five Shariah-based banks were merged into a single state-owned entity to contain systemic risk and protect depositors.
Although consolidation can reduce contagion risk, the ICCB noted that experts have raised concerns over shareholder approval requirements under company law for mergers involving listed firms. It said the effectiveness of such measures will ultimately depend on accountability, improved governance and modern risk-management practices.
The report placed strong emphasis on the need for a professional and autonomous Bangladesh Bank. International experience shows that central bank independence is critical for managing financial stress, sustaining confidence and attracting investment.
Over the past two years, Bangladesh Bank has taken extraordinary steps, including liquidity support and refinancing facilities, to protect depositors and preserve stability. The ICCB acknowledged these actions but cautioned that emergency funding alone cannot ensure long-term stability without prudent lending and sound governance.
To support export diversification, technological advancement and infrastructure development, the ICCB called for strict action against willful defaulters, globally aligned compliance standards and continued strengthening of regulatory capacity.
The editorial concluded that building a resilient banking system is a shared responsibility, requiring coordinated efforts from regulators, bank boards, management, policymakers and the business community to restore trust at home and abroad.
