The World Bank has approved a $450 million loan to help strengthen Bangladesh’s banking sector, enhance depositor protection, improve regulatory oversight, and support reforms in state-owned banks.

The financing was approved by the World Bank’s Board of Directors under the Financial Sector Support Project-2, according to a press release issued on Tuesday.

The project aims to strengthen the country’s deposit insurance framework, establish the foundation for bank resolution mechanisms, and enhance the overall stability of the financial sector.

The World Bank noted that Bangladesh’s banking industry has long faced challenges stemming from weak corporate governance, regulatory capture, and related-party lending. As of March 2026, the non-performing loan (NPL) ratio in the banking sector stood at 32.6 percent, significantly higher than the South Asian average of 7.9 percent. Meanwhile, the sector’s risk-based capital adequacy ratio was negative 2.6 percent at the end of December 2025.

Under the project, the capital base of the deposit protection fund will be strengthened, while measures will be introduced to establish an effective emergency liquidity assistance framework, develop bank resolution strategies, and support reforms in state-owned banks.

Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, said a stable and inclusive financial sector is essential for Bangladesh’s ambition to become a trillion-dollar economy. He noted that the banking sector, which accounts for nearly 90 percent of the country’s financial assets, is currently under significant stress.

He said the project would help protect small depositors, restore confidence in the banking system, and strengthen safeguards needed to maintain financial stability, enabling banks to play a more effective role in supporting economic growth and job creation.

The World Bank also said the project will modernize Bangladesh Bank’s information and communications technology infrastructure, helping improve cybersecurity resilience, strengthen financial data analytics, and enhance risk-based supervision.

Toshiaki Ono, Senior Financial Sector Specialist at the World Bank and Task Team Leader for the project, said the initiative would be implemented in coordination with development partners, including the International Monetary Fund (IMF) and the Asian Development Bank (ADB). The project is expected to improve crisis preparedness and strengthen the capacity of relevant authorities to manage risks in the banking sector.