The Governor made these statements while serving as the chief guest at a conference titled “Banking Sector Reform: Challenges and the Way Forward,” which was held at Paltan in Dhaka.

According to the governor, the “Combined Islamic Bank” is the result of the merger of five banks. He pointed out that capacity limitations prevent the immediate merger of other weak institutions. This year’s budget has been allocated Tk 20,000 crore for banking sector reforms, even though this was not the initial budgeted goal. The central bank will seek Tk 20,000 to Tk 25,000 crore for more banking reforms from the upcoming budget, he continued.

Regarding the Combined Islamic Bank, the Governor said that there were various legal complications involved in merging the five weak banks, which are now being resolved. Within a day or two, the bank’s name and signboards will be changed, and branch names will also be updated. If branches of the five banks are located in the same area, only one branch will remain while the others will be relocated elsewhere. Depositors of the bank will soon receive refunds of up to Tk 200,000 under deposit insurance coverage.

The Governor also said that bank officials will be punished for loan irregularities, stating that just as clapping requires two hands, a board of directors alone cannot destroy a bank. Therefore, in the future, officials involved in irregularities will be brought under punishment alongside board members. Legal frameworks are being prepared accordingly, and officials will no longer receive leniency.

In response to a question, the Governor said that from now on, all loans exceeding Tk 200 million will be re-examined. The adequacy of collateral for these loans will be reviewed, and if deficiencies are found, the concerned officials and bank directors will be held accountable.

Emphasizing the need for Bangladesh Bank’s independence, the Governor said that strong leadership is required at the central bank. A legal proposal has been submitted to the government in this regard. If the government passes this law, comprehensive reforms will be possible.

When asked about who will receive special facilities for loan rescheduling, the Governor said that only factories that are currently operational and regularly producing goods will be eligible. Closed or non-operational factories will not be brought under this facility.

Nine weak non-bank financial institutions (NBFIs) have been identified. These institutions will not be merged but will be liquidated, meaning their assets will be sold to repay liabilities. All general depositors of these institutions will receive their full deposits back, while institutional depositors will receive a portion. In line with international practice, shareholders’ equity will be written off to zero.

Recently, Bangladesh Bank has taken a final decision to shut down nine NBFIs that have been struggling due to irregularities, embezzlement, and mismanagement. Based on three indicators failure to repay depositors, high levels of non-performing loans, and capital shortfalls these institutions were declared “non-viable.” The institutions are: Peoples Leasing and Financial Services, International Leasing and Financial Services, Aviva Finance, FAS Finance and Investment, Far East Finance and Investment, Bangladesh Industrial Finance Company (BIFC), Premier Leasing and Finance, GSP Finance Company, and Prime Finance and Investment Limited.

At the same event, Fahmida Khatun, Executive Director of the private research organization Centre for Policy Dialogue (CPD), said that the upcoming election is a critical juncture. Political parties must include specific measures and firm commitments in their election manifestos on how they will bring discipline to and strengthen the banking sector.

She further said that political leaders must clarify whether they will continue to allow the banking sector to be used by powerful capitalists as before, or whether they will use it for public welfare, job creation, inflation control, and financing small and medium enterprises.

Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank and former Chairman of the Association of Bankers, Bangladesh (ABB), said that reforming the banking sector is not possible without political will.

He said that the main challenge in the banking sector is non-performing loans, and various initiatives have already been taken to reduce them. Borrowers must stop assuming that loans do not need to be repaid. He emphasized that political will is crucial for improving the default loan situation.

Rahman also said that during the previous government’s tenure, a form of “mafia control” began in the banking sector. In 2008, the level of non-performing loans was in a satisfactory state, around Tk 8,000 crore, and overall conditions were good, although not perfect. He said the banking sector began to deteriorate after the takeover of Islami Bank, leading to the emergence of such a system.

Following the July mass uprising and the fall of the Awami League government after one and a half decades in power, positive changes have been observed in the banking sector. Foreign exchange reserves, which had been declining earlier, are now increasing. The central bank is no longer selling dollars but is instead purchasing them from the market, and the volatility previously seen in the dollar market has subsided.

The event was organized by the Economic Reporters Forum (ERF) and chaired by its President, Daulat Akhtar Mala. The program was moderated by the organization’s General Secretary, Abul Kasem.