State-owned banks must be free from political patronage: Wahiduddin

Veteran economist and former Dhaka University economics professor Dr Wahiduddin Mahmud on Wednesday called for an end to the use of state-owned banks as instruments of political patronage and unjustified distribution of benefits.

He also Said Bank plunder is more damaging than a culture of loan defaults, as it has pushed the country’s banking sector into its current crisis, after warning that political interference and weak regulation could lead to a repeat of past abuses.

Dr Mahmud made these remarks while addressing the 11th Annual Banking Conference (ABC) 2026, organised by the Bangladesh Institute of Bank Management (BIBM), as the chief guest.

Describing the financial sector as the “heart of the entire economy”, Wahiduddin said banking and financial institutions should never be used to serve political interests.

‘The banking sector was first ruined by a culture of loan defaults. We managed to move away from that, but after 2010, a culture of bank plunder emerged. This is even more dangerous, as money is taken out of banks without following any rules,’ he said.

Ultimately, the issue requires a political decision by the government, he added.

Referring to banking sector reforms, he said Bangladesh had previously made significant progress in overcoming the culture of loan defaults through reforms at Bangladesh Bank and in the banking sector, bringing a substantial portion of private banks closer to international standards.

However, the relaxation of certain regulations over the past 15 years had pushed the banking sector into another major crisis, he said.

Wahiduddin said some banks might require refinancing and necessary regulatory flexibility to overcome the current crisis.

Such support, however, must be accompanied by adequate safeguards, he added.

He stressed the need to assess genuine entrepreneurs and businesses on a case-by-case basis before extending financial assistance to prevent a recurrence of past mistakes.

Bangladesh’s banking sector had once been plagued by a culture of loan defaults, but a new and more serious problem had emerged after reforms helped address that challenge, he said.

“This is now a culture of bank looting,” he said, adding that the current situation had resulted from money being siphoned off from banks without regard for rules and regulations.

He said banks should be given the opportunity to recover and stand on their own feet through restructuring and refinancing, while strict safeguards must be maintained to ensure that financial assistance reaches eligible borrowers.

Otherwise, the banking sector could return to its previous state of distress, he warned.

Wahiduddin also emphasised that good governance in banking could not be ensured through rules and regulations alone. A minimum level of ethical standards among bankers, entrepreneurs and industrialists was equally essential, he said.

While presenting the keynote paper at the event Dr. Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh (PRI) said Bangladesh cannot restore economic growth without reforming the banking sector, while higher interest rates alone will not be enough to contain inflation.

Sattar called for a coordinated policy approach combining banking sector reforms, fiscal discipline, greater exchange rate flexibility and tariff reductions to control inflation and ensure sustainable economic growth.

Association of Bankers, Bangladesh (ABB) Chairman Abdus Hai Sarker and Bangladesh Association of Banks (BAB) Chairman Mashrur Arefin attended the programme as special guests.

The two-day conference will feature 13 plenary sessions and the presentation of 104 research articles.
More than 800 participants are expected, including experts, bankers, researchers and students from home and abroad.

The event’s media partners are DBC, Daily Bonik Barta, Dhaka Stream and The Business Standard.
BIBM has organized the Annual Banking Conference since 2012.

The gathering brings together experts, academics and researchers from around the world to share knowledge, experience and research findings on banking and related issues. Its sessions cover contemporary issues and sustainability concerns in banking, finance and the economy, in both national and international contexts.