Bangladesh’s banking sector remained under significant pressure throughout the 2024–25 fiscal year due to high interest rates and a tight monetary policy, according to Bangladesh Bank’s latest annual report.
The central bank said the restrictive monetary stance was maintained to curb inflation and stabilise the foreign exchange market. However, the policy also intensified liquidity stress in banks and raised borrowing costs, putting additional strain on the wider financial sector.
The report highlighted persistent weaknesses in several key indicators of the banking industry, including deteriorating asset quality, rising non-performing loans (NPLs), inadequate provisioning and capital shortfalls.
Bangladesh Bank noted that many banks struggled to maintain sufficient provisions and meet required capital adequacy ratios, raising concerns over the sector’s financial resilience.
Experts believe prolonged high interest rates have reduced demand for business and investment loans, while also weakening the repayment capacity of many borrowers, further increasing the risk of loan defaults. At the same time, banks’ fund management costs have risen sharply.
Despite the challenges, the banking sector continued to support economic activities, the report said.
The central bank stressed the need for stronger governance, supervision and risk management to ensure financial stability. It also expressed optimism that reforms in the financial sector and improvements in the monetary policy framework would help restore stability in the banking sector over the medium term.
Bd-Pratidin English/ AM
