The government is going to take a groundbreaking step in the economic history of Bangladesh. For the first time, an initiative has been taken to transform Bangladesh Bank into a constitutional institution. The draft ordinance named 'Bangladesh Bank Order, 2025' has been finalized to give the central bank full authority over the financial sector, make it autonomous and accountable. Several high-ranking sources in the government and Bangladesh Bank said that the draft of the law has already been reviewed by the IMF and the World Bank and it is likely to be issued in the form of an ordinance by December this year. If the law comes into force, Bangladesh Bank will be an independent regulatory institution, accountable only to the parliament. This has created the possibility of closing the long-controversial chapter of administrative interference in the regulation and management of the central bank.
According to the new law, Bangladesh Bank will be among the institutions recognized in the constitution. That is, it will be a constitutional pillar of the state structure. The governor and deputy governors will be appointed for a period of six years with the approval of the parliament and the recommendation of the prime minister. There will also be a provision for a show cause notice and a formal hearing in the case of removal.
Most importantly, the governor and deputy governor will take an oath of office before the Chief Justice of the Supreme Court, which is a major symbolic manifestation of constitutional dignity.
A new framework of self-governance, independence and exclusive control
One of the revolutionary aspects of the new law is that the central bank is being given complete administrative and financial autonomy. To ensure this independence, Bangladesh Bank will be the sole regulatory and supervisory authority of the banking sector; the bank will have sole authority over all types of banks, financial institutions and currency management, both private and state-owned, and the central bank will be able to make independent decisions on monetary policy, inflation control, liquidity management, and maintaining financial stability.
Analysts believe that this move will transform Bangladesh Bank from an 'attached office of the executive branch' into a true financial regulatory body.
Why such a big step?
For a long time, there have been allegations of dual governance of the central bank - on the one hand, the authority of the Ministry of Finance, on the other, legal constraints. As a result, weak bank management, opaque appointments, political influence, and inadequate supervision created 'systemic risk' in the banking sector. The fall in reserves, the crisis of weak banks, high defaulted loans, and corruption incidents in state-owned banks in the 2021-25 period brought this reality to the fore one after another.
According to experts, this transformation is not only due to pressure from the IMF, but also reflects a long-standing demand internally to make the country's economy sustainable.
What is in the new law?
The new law will make the structure and authority of Bangladesh Bank much stronger, independent and accountable. According to the analysis, it will introduce at least 7 key changes that will transform the character and power of the entire central bank.
Constitutional status and parliamentary control
Bangladesh Bank will be recognized as a constitutional institution, accountable only to the National Assembly. The appointment, removal, or reappointment of the Governor and Deputy Governors for a six-year term-all with the approval of the Assembly and the recommendation of the Prime Minister-will be mandatory.
The governor has to take an oath before the Chief Justice of the Supreme Court, which is not the case with any other financial institution.
Status of governor to be increased as minister
Currently, the central bank governor is ranked at grade 14 (below secretary). The new law will give him the status of a minister and he will be ranked fourth in the state protocol. This will give him a much more effective voice at the highest levels of government.
The Governor will be the Chief Executive Officer (CEO) of Bangladesh Bank. However, instead of sole authority, the obligation to consult the 'Executive Advisory Committee' has been kept - which will assist the Governor in making decisions on matters other than monetary policy and audit.
A 'Coordination Council' will be formed to coordinate the overall economic, fiscal and monetary policy, headed by the Finance Minister. The members of this council will be the Planning Minister, Commerce Minister, Finance Secretary and the Governor of Bangladesh Bank.
The power of a sole controller
Bangladesh Bank will be the sole regulator of the country. It will be responsible for all private and state-owned banks; Banking and Financial Institutions Act; Monetary policy formulation and implementation; Bank resolution and restructuring and risk-based supervision.
Bangladesh Bank will be able to make these decisions under its own policies, without any ministry or external interference, in coordination with the IMF and foreign institutions.
Professional board of directors, government officials banned
The institution will have an 8-member board of directors, including: the governor (chairman); two deputy governors and five independent non-governmental members. Each of these five members must have 15 years of experience in economics, banking, accounting, law or risk management. No government official or bureaucrat can be included in it.
This is the first move in the history of the central bank to form a completely professional and non-bureaucratic board.
In this context, a senior official of Bangladesh Bank said, "Due to dual governance, the decisions of the central bank were not implemented until now. Under the new law, the board will be independent, professional and effective."
Resolution unit for weak banks
To address the long-standing weaknesses of the banking sector, Bangladesh Bank will form a 'Bank Resolution Department' as per the proposed law. This department will be the regulator of all resolution activities including bank closure, restructuring, board dissolution, and asset transfer.
According to an IMF report, the number of weak banks in Bangladesh is increasing rapidly, and the government is unable to provide a permanent solution despite providing incentives worth billions of taka every year. Analysts are calling the resolution powers proposed in the new law a 'game changer' to end this situation. That is, under the law, Bangladesh Bank will get independent and strong powers to manage bank resolution.
Identifying weak and risky banks: Dismissing the board; Appointing a new board; Bank mergers; Capital reform and asset transfer. The central bank can even take decisions such as closing the bank if necessary.
Bangladesh Bank has already identified 15 weak banks. Of these, the boards of directors of 14 have been dissolved, and an administrator has been appointed in one bank. In addition, new policies have been implemented to disclose the identities of bank owners and prevent 'benami ownership'.
Governor Dr. Ahsan H. Mansur said, 'These banks will not survive without merger. We are starting the merger with five banks, and later the state-owned banks will also be included.'
He said that strict action has also been taken against non-bank financial institutions (NBFIs). At least 15 institutions are practically bankrupt, with default rates of 80-100 percent. 20 NBFIs have been put on show cause notice. Their future will be liquidation or merger.
Five major laws surrounding the banking sector
In addition to the constitutional transformation of Bangladesh Bank, work is currently underway under the leadership of Bangladesh Bank to amend or enact five important laws, all of which have one purpose - recovery of bad loans, stability of banks, and prevention of wastage of public money.
The laws are:
? Bankruptcy Act: This law will modernize the country's corporate bankruptcy process. Now, those who default or go bankrupt, put off liquidation for years. This law will provide for early restructuring, so that losses are minimized and the bank's money is returned quickly.
? Money Loan Court Act: The effectiveness of the Money Loan Court is being enhanced to remove the complexity of loan cases. Provisions will be made for speedy disposal of cases, fixed time limits, and appointment of experienced judges related to banking. The target for its implementation has already been set by the first quarter of 2026.
? Distressed Asset Management Act: This law will allow the private sector to form licensed asset management companies that will buy and recover defaulted loans. However, the government has made it clear that no 'bad banks' will be formed, and these loans will not be purchased with public money.
? Bank Resolution Ordinance: This law, passed in May 2025, gives Bangladesh Bank full powers to close banks, dismiss boards of directors, and transfer assets. It will serve as Bangladesh's first "crisis backstop model."
? Deposit Protection Ordinance: This law has doubled the deposit insurance limit to Tk 2 lakh. In addition, an emergency fund called Pay Box Plus will be formed - which will help protect and restructure the deposits of failed banks.
Task force to recover assets: Corruption money will also be brought back
Bangladesh Bank has formed an Asset Recovery Task Force, which will be led by the central bank. It will include the Bangladesh Financial Intelligence Unit (BFIU) and the Anti-Corruption Commission (ACC). The agency will also seek cooperation from international organizations and Interpol or the FBI.
The task force's responsibility is to find and bring back money laundered out of the country, and to recover capital laundered through corruption.
IMF assistance depends on implementation
The next tranche of the IMF's $5.5 billion loan is contingent on the implementation of these reforms. The World Bank and the Asian Development Bank have also supported the initiative.
Analysts say this is the largest and most comprehensive banking sector reform in Bangladesh's history. However, whether this initiative will succeed depends on the practical application of political will and administrative skills.
Six main conditions of the IMF agreement and reforms
Bangladesh is receiving a $5.5 billion loan from the IMF. In return, the central bank reform has six main conditions: ensuring constitutional status and independence; establishing a full framework for bank resolution; asset quality review (AQR) of private banks;
Deposit Protection System launched; transparent appointment and governance structure and neutral liquidity support structure created.
The IMF will release the next tranche based on progress in implementing these reforms.
'Banks will not function without independent directors'
Bangladesh Bank Governor Dr. Ahsan H. Mansur said, 'Half the members of the board of directors of every bank must be independent directors. No more than three members from one family will be allowed. No bank is safe without independent directors.'
He further said, 'Bank management is not just about ownership-it's about the people. The owners are just guardians. If they don't take responsibility, they too will be removed if necessary.'
He said that work is already underway to merge five private banks, and if necessary, state-owned banks will also join the process. In addition, 15 financial institutions are practically bankrupt, with defaulted loans of 80-100 percent.
"These reforms will continue, even if the government changes, the policy will not change. If it does, the economy will collapse," says the governor.
Are central bank reforms enough to save banks?
According to analysts, the constitutional recognition and legal reform of Bangladesh Bank are certainly groundbreaking. But its implementation will depend largely on political will and administrative efficiency.
If an impartial, qualified governor is not appointed, or if parliamentary approval is merely a 'rubber stamp', these reforms will once again remain limited to paper.
Former World Bank Chief Economist Dr. Zahid Hossain said, "Constitutional status will not be of any use if we do not appoint qualified, independent and professional governors. For this, there must be a search committee and transparent policies."
It is worth noting that the constitutional transformation of Bangladesh Bank, legal reforms, mergers and resolution frameworks - all together, this is the largest and most comprehensive effort to reform the banking sector in Bangladesh. If implemented properly, the country's banking system can be truly modern and accountable. However, whether this step will be successful will depend on the presence of transparency, goodwill and long-term strategic planning at the center of power.
