Bangladesh’s banking and financial sector is facing an unprecedented crisis, with twelve banks reportedly on the verge of bankruptcy and fifteen others classified as critically weak. Experts say the situation has emerged largely due to widespread embezzlement, mismanagement, and political interference during the tenure of the Awami League government, leaving ordinary depositors to bear the brunt of the financial misgovernance. Many customers are now unable to withdraw their hard-earned money from these banks, highlighting a deepening liquidity crisis that threatens the stability of the entire sector.
According to speakers at a recent seminar on the banking sector held at the Nawab Nawab Ali Chowdhury Senate Building of the University of Dhaka on September 21, the extent of non-performing loans (NPLs) in the country’s banks is alarmingly high. Estimates indicate that NPLs could exceed Tk 5.7 lakh crore, and the ratio of bad loans to total loans could rise to 30-40 percent in the near future. Such a spike in defaulted loans would further exacerbate liquidity shortages, making it increasingly difficult for banks to meet depositor demands.
Escalating Crisis: Twelve Banks Near Insolvency: The seminar, jointly organized by the University of Dhaka, the University of Asia Pacific (UAP), and Germany’s OTH Amberg-Weiden, brought together bankers, academics, and industry experts to discuss the sector’s deteriorating condition. The Governor of Bangladesh Bank, Dr. Ahsan H. Mansur, attended as the chief guest, highlighting the severity of the crisis. Key research papers were presented by Dean Mahmud Osman Imam of Dhaka University’s Faculty of Business Studies, detailing the scale of the problem and potential remedies. According to seminar participants, twelve banks are practically insolvent, unable to repay depositors’ money. An additional fifteen banks are extremely weak, with more than half of them reportedly involved in large-scale embezzlement. Such malpractices have severely undermined confidence in the sector, leading to widespread apprehension among depositors and investors.
Looting and Mismanagement Behind the Crisis: Speakers at the seminar repeatedly stressed that mismanagement and large-scale embezzlement have been primary drivers of the crisis. “S. Alam alone has virtually destroyed the entire banking sector, and his accomplices have further deepened the damage,” one expert noted. Restoring stability, they said, will require significant time and concerted effort. While reform measures have been introduced in the past, political interference has often disrupted their implementation, reducing their effectiveness and, in some cases, causing the sector to regress to a worse state than before. Experts highlighted that the caretaker government had inherited a relatively strong banking sector. However, under the subsequent Awami League administration, the benefits of earlier reforms could not be sustained. Instead, several critical reform measures were rolled back, creating an environment conducive to large-scale embezzlement. The result has been systemic damage, with the banking sector now facing unprecedented liquidity and solvency challenges.
Non-Performing Loans: A Growing Threat: Non-performing loans have become a major concern for policymakers and bankers alike. Current estimates suggest that bad loans in the sector could exceed Tk 5.7 lakh crore, with the share of NPLs in total loans potentially rising to 30-40 percent. Such a high level of default not only strains liquidity but also raises the cost of credit, undermining the sector’s ability to support economic growth.
The seminar’s speakers warned that unless urgent corrective measures are taken, the banking sector could continue to face long-term instability. Many of the embezzled funds have reportedly been smuggled abroad, making recovery difficult. The remaining liquidity crisis, they said, is likely to persist, further endangering depositors and investors.
Voices from the Banking Sector: Among the prominent speakers were top executives from major banks, including Mohammad Ali, Managing Director of Pubali Bank; Masrur Arefin, Managing Director of City Bank; and Sohel R.K. Hossain, Managing Director of Bank Asia. They outlined the operational challenges banks face in a context of weakened governance, highlighting both internal and external pressures that have eroded sectoral resilience.
Experts noted that reform measures, while positive in intent, have often lacked continuity. “Even when steps are taken to improve the sector, political changes prevent reforms from taking root,” one participant said. This inconsistency, combined with systemic embezzlement, has created a precarious environment for depositors and investors alike.
Impact on Depositors and Public Confidence: The repercussions for ordinary citizens have been severe. Depositors have been unable to access their funds in several banks, creating anxiety and uncertainty. The liquidity crunch is affecting not just individual savers but also businesses that rely on bank credit for operations. This disruption in financial services could have far-reaching consequences for the wider economy, particularly in a country where the banking sector plays a central role in facilitating trade, investment, and economic growth.
The seminar highlighted that the majority of embezzled funds have been moved abroad, rendering recovery virtually impossible. This reality further intensifies the liquidity crisis and underscores the need for immediate intervention. Without prompt and effective measures, experts warned, depositors will continue to face hardships, and the banking sector could spiral further into instability.
Calls for Reform and Oversight: Participants at the seminar urged the government and regulators to strengthen oversight, implement robust reforms, and ensure continuity in policy measures. They emphasized that only through a combination of strict regulation, consistent reform, and legal action against those responsible for embezzlement can the sector be stabilized.
Several experts also called for improved risk management and stricter governance mechanisms within banks. “A clear roadmap for reform and a zero-tolerance approach to embezzlement are essential to restore confidence,” one speaker noted. They stressed that without such measures, public trust in the banking sector could be irreparably damaged, with severe consequences for the broader economy.
Long Road to Recovery: Rebuilding confidence in Bangladesh’s banking sector, experts agreed, will require time, discipline, and sustained political will. While the sector has seen reform initiatives, their intermittent implementation has undermined potential progress. Policymakers now face the dual challenge of addressing immediate liquidity issues while instituting structural reforms to prevent future crises.
The seminar concluded with a call for urgent, coordinated action to protect depositors and stabilize the financial system. Without timely intervention, the banking sector’s weaknesses could continue to ripple through the economy, affecting businesses, individuals, and overall economic growth.
The seminar at Dhaka University painted a sobering picture of Bangladesh’s banking sector: twelve banks on the brink of collapse, fifteen critically weak, and systemic embezzlement leaving depositors in distress. Experts highlighted the urgent need for regulatory reforms, political continuity in implementing these reforms, and recovery of embezzled funds to stabilize the sector.
As depositors grapple with access to their funds and non-performing loans continue to rise, the banking sector faces a critical juncture. Without decisive action from regulators, policymakers, and bank management, the consequences could extend beyond the financial sector, impacting economic stability and growth in Bangladesh for years to come.