The Deep Wounds of Bangladesh’s Financial System
By Asif Showkat Kallol (Dhaka Bureau)
The banking sector forms the bedrock of a nation’s financial architecture, relying fundamentally on public trust and the security of savings. However, political patronage, lax regulatory oversight, and unchecked ownership by industrial conglomerates have pushed Bangladesh’s banking sector into a profound crisis. As millions of ordinary depositors worry about the safety of their hard-earned money, the country’s banks are struggling under a record burden of non-performing loans (NPLs).
According to recent official data from Bangladesh Bank, classified or defaulted loans accounted for roughly 36% of total outstanding credit as of June 2026. This places Bangladesh among the nations with the highest bad-loan ratios globally, trailing only war-torn Ukraine. Furthermore, the banking sector’s overall Capital Adequacy Ratio (CAR) has dipped into negative territory, indicating that many institutions no longer possess sufficient capital to absorb further financial losses.
Control vs. Ownership: A Severe Conflict of Interest
Bangladesh currently operates 63 scheduled banks. While this number is disproportionately high for the size of the national economy, the primary crisis stems not from the quantity of institutions, but from who controls and manages them.
Deviating from international best practices, ownership of most leading private commercial banks has been handed over to powerful industrial groups. Owners of garment factories, power plants, real estate firms, and construction empires have become bank sponsors and directors. Economists view this as a direct and inherent conflict of interest. While banks are structured to evaluate risk and safeguard public deposits, commercial conglomerates operate to take risks and expand business empires. When both roles are merged within the same ownership structure, an unhealthy temptation arises to funnel depositors’ money into affiliated enterprises.
Regulatory investigations have repeatedly highlighted the prevalence of related-party lending, where sponsor-directors grant excessive credit lines to entities linked to their own corporate interests. Regulatory audit documents- most notably those involving Islami Bank Bangladesh- have repeatedly exposed unusual, high-volume loan exposures tied to a single business conglomerate.
Regulatory Laxity and International Contrasts
The roots of this structural crisis extend back several decades. Starting with six state-owned banks after independence, Bangladesh witnessed rapid expansion of the private sector in the 1990s. Governance concerns deepened significantly in 2013 when nine new private banks were licensed despite central bank reservations regarding sector capacity. The situation worsened in 2017 following amendments to the Bank Company Act, which increased family representation on bank boards and extended directors’ tenures, further entrenching corporate control.
International precedents highlight the necessity of separating industrial ownership from banking operations to preserve corporate governance:
* United States: Following the Great Depression in the 1930s, strict barriers were established between commercial banking and industrial ownership to prevent non-financial corporations from controlling financial institutions.
* India: Major commercial banks were nationalized in 1969 to ensure that credit was not diverted exclusively to private industrial houses at the expense of broader national economic development.
Nonviolent and Humanist Economics: The Path Forward
A just, human-centered society requires a stable and equitable financial system. The current turmoil in the banking sector is not merely an economic issue; it represents a direct threat to public confidence and social stability.
Drawing on insights from banking specialists and civil society advocates, essential steps toward sustainable recovery include:
1. Curbing Ownership Concentration: Enforcing strict caps on family and corporate group representation on bank boards.
2. Establishing Independent Professional Boards: Empowering professional bankers and truly independent directors free from political influence.
3. Consolidation and Resolution: Implementing structured mergers or orderly resolutions for fragile and insolvent banks.
4. Enforcement and Transparency: Exercising strong regulatory authority to completely eliminate related-party lending practices.
Ultimately, a bank is not the private property of a corporate empire; it holds a sacred trust on behalf of the public. To safeguard financial stability and foster a human-centered economic framework, the time for deep, structural, and lasting banking reforms is now.
Asif Showkat Kallol : Works for the German-based online outlet The Mirror Asia as Head of News and is a Contributor at Pressenza-Dhaka Bureau.
