When Banks Cannot Protect People’s Money, What Is Left of Public Trust?
Bangladesh has a remarkably large banking sector for a country of its size and economic structure.
Bangladesh Bank currently lists 63 scheduled banks, including state owned, specialised, private and foreign banks. But the key question is no longer why Bangladesh has so many banks.
It is whether these banks are strong enough to protect the savings of millions of ordinary people.
The answer is increasingly worrying.
For years, Bangladesh’s banking sector has suffered from huge defaulted loans, weak governance, questionable lending practices, liquidity pressures, capital shortages and allegations of money being transferred abroad.
What was once mainly a problem for bankers and regulators has now become a serious concern for ordinary depositors.
The scale of the bad loan problem is extraordinary. Bangladesh Bank reported that gross non-performing loans reached Tk 5.57 trillion at the end of December 2025, with the non-performing loan ratio reaching 30.6 percent.
By March 2026, the World Bank put the ratio at 32.6 percent, compared with an average of 7.9 percent for South Asian banks.
International comparisons have placed Bangladesh’s non-performing loan ratio among the highest in the world, reportedly second only to Ukraine.
The World Bank also reported that the banking sector’s capital to risk weighted assets ratio had fallen to a negative 2.6 percent at the end of December 2025.
These are not merely technical banking figures. They represent money that banks have lent but failed to recover properly.
Behind the numbers are the savings of millions of citizens. When banks cannot recover loans, the consequences can ultimately reach depositors, taxpayers, businesses and the wider economy.
How did so much money become bad debt?
The problem did not emerge overnight. Bangladesh’s banking sector has long suffered from weak credit assessment, inadequate monitoring, poor corporate governance, related party lending and ineffective recovery of defaulted loans.
The World Bank has identified weak corporate governance, regulatory capture and related party lending as significant challenges.
The International Monetary Fund has also raised serious concerns. In its 2025 Article IV assessment published in January 2026, the IMF said banking sector stress was rooted in unsuitable ownership, excessive related party lending and weak supervision.
It reported that system wide non-performing loans had reached 34 percent at the end of June 2025 and warned that banking vulnerabilities had worsened amid widespread undercapitalisation.
The IMF also noted persistent liquidity stress, underreported non-performing loans and suspected fraudulent activities.
It warned that failure to address these problems could create significant fiscal costs, including the possible need to recapitalise state owned banks and support the deposit protection system.
The Asian Development Bank has also highlighted the crisis.
In June 2025, it approved $500 million to support banking sector reform in Bangladesh, identifying weak asset quality, tight liquidity and inadequate financial intermediation as major constraints.
Its programme includes measures to strengthen supervision, improve corporate governance, address non-performing loans and strengthen Bangladesh Bank’s liquidity management.
The consistent warnings from the World Bank, IMF and ADB show that Bangladesh’s banking problem is not a temporary difficulty. It is a structural crisis requiring fundamental reform.
Another serious concern is the alleged transfer of money abroad. In 2025, Bangladesh Bank estimated that between $18 billion and $20 billion had been laundered abroad during the previous regime and said the money had been taken from the banking sector as loans.
These figures are estimates and allegations requiring investigation and legal determination in individual cases.
However, the scale of the estimate demonstrates the seriousness of concerns over illicit financial flows.
If money obtained through the banking system is illegally transferred abroad, the damage extends beyond individual banks.
It reduces resources available for domestic investment and weakens the financial system on which ordinary citizens depend.
Consider an ordinary depositor who has spent decades saving money in a bank. Consider a small businessman keeping working capital in an account, or a family saving for education or medical treatment.
These people did not approve billion taka loans or decide which businesses would receive huge amounts of credit.
Yet they can ultimately bear the consequences when banks become weak.
This is perhaps the most troubling aspect of the crisis.
People who played by the rules can be forced to pay for the failures of those who did not.
The authorities have begun taking measures. Bangladesh Bank has introduced risk based supervision, strengthened loan classification requirements and developed mechanisms for resolving troubled banks.
Deposit insurance coverage has also been increased from Tk 100,000 to Tk 200,000 per depositor.
The World Bank approved $450 million in June 2026 to support Bangladesh’s financial sector reforms, including stronger deposit protection, improved Bangladesh Bank supervision, emergency liquidity assistance, bank restructuring and reform of state owned banks.
These initiatives are important, but the public has heard promises of banking reform for years. What people now need is measurable results.
Where is the money that was lent irresponsibly? Who received it? How much has been recovered? How much has been written off? How much has been transferred abroad? What assets have been recovered? And who has been held accountable?
These questions deserve clear answers.
Repeated loan rescheduling cannot become a permanent escape route for influential borrowers.
Writing off loans cannot become a way of hiding failures. Injecting public money into troubled banks cannot become an automatic solution whenever powerful borrowers fail to repay.
Accountability must extend throughout the lending chain. Borrowers who deliberately default must face the consequences established by law.
Bank directors and executives responsible for reckless lending must face appropriate scrutiny. Regulators must act before a bank becomes critically weak, rather than waiting until billions of taka are unrecoverable.
Bangladesh does not necessarily need more banks. It needs stronger banks, better governance and more effective supervision.
The most dangerous consequence of the crisis may not be the size of the bad loans but the gradual erosion of public confidence.
If people begin to believe that keeping their savings in a bank is unsafe, they may start keeping cash at home, in cupboards, boxes or other hiding places. Such a development would hurt the entire economy.
Money hidden at home cannot finance factories, agriculture, businesses or employment.
Restoring confidence in the banking system must therefore be a national economic priority.
Bangladesh cannot afford a financial system in which ordinary people remain responsible depositors while powerful borrowers repeatedly escape responsibility.
Nor can the country continue to socialise banking losses while the benefits of irresponsible lending remain concentrated in private hands.
The World Bank, IMF and ADB have all pointed toward stronger governance, better supervision, improved asset quality and effective recovery of bad loans.
The government and Bangladesh Bank now have a responsibility to turn these recommendations into measurable action.
People deposit their money in banks because they believe the banking system will protect it.
That confidence is the foundation of the entire financial system.
If that confidence disappears, people may eventually ask: If we cannot trust the banks with our savings, where should we keep our money?
Bangladesh must ensure that the answer never becomes a return to hiding money in a box.
The banking system must regain public trust, not through promises, but through transparency, accountability, loan recovery and genuine reform.
(The writer is the Editor and CEO of News Network)
