Banking reform roadmap is a welcome step, but success depends on implementation
We welcome the government's decision to undertake a sweeping overhaul of the country's financial sector, as outlined in its latest agreement with the IMF. This includes a detailed three-year roadmap aimed at undertaking comprehensive banking reforms. The plan, also supported by the World Bank and the Asian Development Bank, reportedly comprises a package of legislative, supervisory, and institutional changes designed to restore stability, recover bad loans, and shield taxpayers from future bank failures. Its objective is to establish a long-overdue, government-wide strategy for a banking sector that has been devastated by corruption and a lack of regulatory enforcement over the years.
As of the end of March this year, bad loans in the banking sector soared to a record Tk 420,335 crore. Of this, Tk 300,028 crore was concentrated in just 10 banks, according to data from Bangladesh Bank. Some of these now-underperforming banks were once respected institutions, whose standards of governance deteriorated drastically under the Awami League regime, largely due to political interference. A few were even forcibly taken over, reportedly at gunpoint, by individuals favoured by the former government. Regulators became totally ineffective, often facilitating rule-breaking and corruption, which pushed the sector nearly to its breaking point.
For all latest news, follow The Daily Star's Google News channel. In this context, the introduction of the reform plan—and particularly its substance—sends a positive signal. For instance, the series of laws the government has committed to enacting or amending by the first quarter of FY2026 address several of the sector's most pressing problems. These include a Bankruptcy Act, a Money Loan Court Act, a Distressed Asset Management Act, a Bank Resolution Ordinance, and a Deposit Protection Ordinance. To enhance transparency, the central bank has issued a new rule requiring banks to identify and report their true owners.
In this context, the introduction of the reform plan—and particularly its substance—sends a positive signal. For instance, the series of laws the government has committed to enacting or amending by the first quarter of FY2026 address several of the sector's most pressing problems. These include a Bankruptcy Act, a Money Loan Court Act, a Distressed Asset Management Act, a Bank Resolution Ordinance, and a Deposit Protection Ordinance. To enhance transparency, the central bank has issued a new rule requiring banks to identify and report their true owners. Furthermore, by amending the Bank Company Act, the government aims to ensure that bank owners and board members are selected based on qualifications rather than political affiliations. For asset recovery, it has reconstituted a special task force, whose performance will be particularly important given the vast sums of money that have been looted from the country.
While such reforms are clearly necessary, it is their implementation that may prove to be more challenging, however. It remains to be seen how much the interim government will be able to achieve, given its limited tenure. The next elected government is expected to oversee the latter phases of the roadmap, so it is essential for the interim administration to bring political parties on board. Considering how such reform plans often fell by the wayside in the past, ensuring strict implementation is key—and that is where the government needs to most focus on.
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