A lawmaker has called for abolishing the Financial Institutions Division (FID) under the Ministry of Finance and restoring full control over state-owned banks to Bangladesh Bank to end dual governance in the banking sector.

The demand was made by MP Md Abul Hasnat Abdullah in a discussion paper submitted ahead of the fifth meeting of the Parliamentary Standing Committee on the Ministry of Finance.

He argued that the continued existence of the FID has contributed to political interference in the banking sector, uncertainty over appointments and transfers, and a lack of accountability.

In the paper, the lawmaker also criticised the government’s failure to fulfil a pre-election pledge by Finance Minister Amir Khasru Mahmud Chowdhury to abolish the division. He said the commitment, made in October last year, had yet to be implemented.

Citing the appointment of Sonali Bank’s managing director (MD), Abdullah pointed to administrative inconsistencies in the FID’s decisions. On October 19, the division cancelled the remaining tenure of the bank’s MD’s contractual appointment but reversed its decision seven days later, allowing him to continue in the position.

He also questioned the appointment of executives from private commercial banks as managing directors of state-owned banks, arguing that the selection criteria and qualifications were unclear.

He proposed that MDs and deputy managing directors (DMDs) of state-owned banks should be appointed through open competition under Bangladesh Bank’s supervision, selecting experienced professionals from government-owned banks.

According to information provided by the finance minister in Parliament on September 6, the total classified loans of six state-owned banks stood at Tk 147,776.36 crore as of June 30, 2026.

Janata Bank accounted for the highest amount of defaulted loans at Tk 75,396.67 crore, followed by Agrani Bank with Tk 29,029.67 crore, Rupali Bank with Tk 19,281.74 crore, Sonali Bank with Tk 15,048.39 crore and BASIC Bank with Tk 8,131.09 crore.

The lawmaker attributed a significant portion of Janata Bank’s bad loans to alleged irregularities involving Beximco, S Alam Group, AnonTex and Crescent Group. He also alleged that politically influenced appointments to bank boards and management had created opportunities for such irregularities.

In his discussion paper, Abdullah outlined four major proposals to bring structural reforms to the banking sector.

These include abolishing the FID and transferring oversight of state-owned banks and financial institutions to Bangladesh Bank; establishing clear legal provisions governing the tenure and removal of the central bank governor to prevent arbitrary executive interference; appointing independent directors through Bangladesh Bank and introducing key performance indicators (KPIs) for bank boards; and separating bank ownership from management and control in line with the policies of the International Monetary Fund (IMF) and the World Bank.

He said changing individuals alone would not resolve the banking sector’s problems, stressing that the political influence and institutional structures enabling irregularities must be addressed.

The Financial Institutions Division was established on January 6, 2010. The discussion paper stressed the need to end dual control over state-owned banks.

It also referred to similar views expressed by Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), and the Bangladesh Bank Officers’ Council.

Meanwhile, the paper noted growing dissatisfaction among bankers over the decision to appoint executives from private banks as managing directors of state-owned banks.