---

Deep-rooted governance failures, a surge in non-performing loans (NPLs) and weak coordination between monetary and fiscal authorities are threatening the stability of Bangladesh’s banking sector, experts warned at a workshop on the latest monetary policy statement.

They revealed that the actual NPL ratio has climbed to 35.7 per cent — far higher than previously reported — exposing the scale of stress in the system and the need for urgent structural reform.

The concerns were raised at a workshop titled “Monetary Policy Statement: Relevance for Banks”, organised by the Bangladesh Institute of Bank Management in Dhaka on Wednesday.

Speaking at the event, Ahsan Ullah, adviser to former Bangladesh Bank governor Ahsan H Mansur, said bad loans had long been kept “under the carpet.”

“Transparency is essential to prescribe the right corrective measures,” he said, stressing that the true NPL ratio of 35.7 per cent reflects accumulated weaknesses in loan classification and governance.

Dr Akhand Mohammad Akhtar Hossain, chief economist of the central bank, described the current monetary policy environment as “ad hoc,” pointing to an “interlocking credit market system” shaped by vested interests that distort credit allocation.

He cautioned that high nominal interest rates during inflationary periods often attract poor-quality borrowers, creating moral hazard and further asset quality deterioration.

Speakers also highlighted a persistent “blame game” between the central bank and the Ministry of Finance, arguing that the lack of fiscal-monetary coordination is undermining inflation control and eroding public confidence.

While the central bank aims to bring inflation down to 4.0–5.0 per cent, price pressures driven by global fuel costs, domestic supply disruptions and structural rigidities continue to weigh on stability.

Mohammad Ali, managing director and CEO of Pubali Bank PLC, warned that rising government borrowing — exceeding Tk 1.3 trillion from the banking system — risks crowding out private sector credit.

He also noted a “flight to quality,” with stronger borrowers shifting to better-governed banks amid growing concerns over asset quality.

In a keynote paper, Mahmud Salahuddin Naser, executive director (research) at the Monetary Policy Department of Bangladesh Bank, outlined reform initiatives including risk-based supervision from January 2026, resolution planning for weak banks, strengthened governance, asset recovery drives, bond market development and the promotion of financial inclusion and a cashless economy.

Deputy Governor Nurun Nahar said the monetary policy statement acts as a strategic compass for banks, guiding interest rate risk management, liquidity planning, credit strategy and compliance.

The workshop was chaired by Dr Md Ezazul Islam, director general of BIBM, who called for research-driven dialogue to build a resilient and forward-looking banking sector.