Strong political pledges needed to prevent repeat of banking sector plunder: Experts
They blame both owners and officials for banking sector’s collapse
Both bank owners and officials were responsible for large-scale looting of Bangladesh's banking sector during the Awami League era, bankers and economists said today (18 December).
They urged political parties to make clear and binding reform commitments in their election manifestos to prevent future collapse.
The call came at a discussion titled "Banking Sector Reform: Challenges and the Way Forward," organised by the Economic Reporters Forum (ERF) in Dhaka, where speakers highlighted deep structural weaknesses, political interference and regulatory failures that pushed the sector to the brink.
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Bangladesh Bank Governor Ahsan H Mansur said bank officials must share responsibility for past irregularities, arguing that large-scale looting would not have been possible without their active or passive facilitation.
"If officials had not allowed loans to be siphoned off in this manner, owners would not have had the scope to loot banks on such a scale," he said.
He announced that all loans exceeding Tk20 crore would be re-examined to verify the adequacy of collateral. "If irregularities are found, both the officials concerned and bank directors will be held accountable."
If bank officials had not allowed loans to be siphoned off in this manner, owners would not have had the scope to loot banks on such a scale. …..
Stressing the need for institutional strength, the governor said Bangladesh Bank requires full independence and competent leadership, adding that a proposal for legal reforms has already been placed before the government. "If this law is passed, meaningful reform will be possible."
As part of the restructuring process, Mansur said the legal procedures for merging five banks have already been completed, with changes to logos, signboards and branch names to take effect within the next few days. Where multiple branches exist in the same area, only one will remain, while others will be relocated. In addition, nine non-bank financial institutions are being liquidated.
He assured depositors that all general depositors of the merged banks would receive their full money back, while institutional depositors would recover a portion.
Deposit insurance coverage has been fixed at Tk2 lakh, and he suggested that an injection of Tk20,000 crore by new entities would virtually eliminate risks to small savers.
On the macroeconomic front, the governor said foreign exchange reserves are expected to rise to between $34 billion and $35 billion by the end of the 2025-26 fiscal year. He clarified that the central bank is not pressuring the market to procure dollars, instead purchasing foreign currency through market-based auctions.
Mansur said the economy is gradually moving from a fragile position towards stability, adding that concerns over the balance of payments and dollar shortages have largely eased.
It is crucial for political parties to include specific commitments on banking reforms in their manifestos for the upcoming national election.
However, he acknowledged that the banking sector's problems are deeper than previously estimated, revealing that non-performing loans (NPLs) now stand at around 36%, far higher than his earlier estimate of 25–27%. "No data will be concealed. The public will be shown the true state of the economy," he said.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), called on all political parties to include specific, time-bound commitments for banking sector reforms in their election manifestos to restore discipline in the country's financial heart.
The economist implied that since the sector's collapse was largely driven by political agendas, the remedy may also be rooted in a firm political mandate.
"It is crucial for political parties to include specific commitments on banking reforms in their manifestos for the upcoming national election," she said, adding that without such high-level political backing, institutional recovery would be nearly impossible.
She further stressed that full autonomy of the Bangladesh Bank is non-negotiable if the sector is to move past the era of politically motivated lending.
Fahmida emphasised that the banking sector, once a powerhouse for creating local entrepreneurs, is now in a state of near-collapse. She attributed this decline to a toxic mix of policy weaknesses, direct political interference, and a systemic lack of rigorous screening during loan disbursements.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, highlighted the historical context of the current crisis.
He argued that the "mafia system" within the banking sector originated with the forced takeover of Islami Bank Bangladesh, which accelerated the crisis. He pointed out that commercial banks were often forced to engage in long-term industrial financing due to an ineffective capital market.
While noting that the political transition has brought positive changes, including a reduction in dollar market volatility and a steady rise in reserves, Mahbubur cautioned that banking reforms alone would not suffice.
The meeting was chaired by ERF President Doulot Akter Mala and conducted by its General Secretary Abul Kashem.
