Bangladesh’s financial sector is contending with a severe and prolonged image crisis as deep-rooted issues of corruption, irregularities, and loan defaults continue to undermine public and investor confidence. Despite a minor rebound in trust, the banking system remains under pressure, with the private sector credit growth hitting its lowest level in two decades—directly affecting investment and job creation.
While bank deposits have grown, the sector is struggling under a record provision deficit and a surge in default loans, painting a bleak outlook. According to Bangladesh Bank, defaulted loans jumped to Tk 5,30,428 crore by June 2025—an unprecedented 27.09% of total disbursed loans. In just one year, the figure rose by Tk 3.19 lakh crore, up from Tk 2,11,391 crore in June 2024. For context, the default loan amount in 2009 was only Tk 22,481 crore. Provision shortfalls have also skyrocketed from Tk 26,585 crore in March 2024 to nearly Tk 2 lakh crore this year.
The situation has worsened following a scandal involving Shahinul Islam, the chief of the Bangladesh Financial Intelligence Unit (BFIU), whose controversial appointment was part of banking sector reforms. An explicit video of Shahinul has gone viral, prompting unrest within Bangladesh Bank. Despite calls for compulsory leave, he remains in office, deepening the regulatory body’s credibility crisis.
Meanwhile, protests erupted at the Secretariat as government employees opposed reductions in service benefits. Frustration is mounting over recent administrative restructuring, including the division of the National Board of Revenue (NBR). Several civil servants have already been dismissed for rule violations, while others fear job losses. Many officials allege that loyalists of the ousted Awami League continue to hold sway within the interim administration, undermining reform efforts.
An additional secretary from the Finance Division, speaking anonymously, claimed that individuals who benefited under the previous government are still in powerful positions by "changing colors." These actors are allegedly influencing key institutions such as the NBR, Finance Division, and Bangladesh Bank, perpetuating the crisis.
Eminent economist Dr. Zahid Hussain commented, “Such opportunistic individuals exist in every regime. The interim government has initiated changes, but purging all vested interests instantly is impractical. Those holding key financial positions are taking advantage of the chaos, worsening the image crisis.”
Further complicating the situation is the stalled merger of weak banks. Despite repeated assurances from the central bank governor, little progress has been made, heightening uncertainty in the financial system.
Simultaneously, the economy faces a slowdown. Many businesses with ties to the former ruling party have defaulted, and even previously stable borrowers are struggling under recessionary pressures. New loan classification policies are also contributing to the rising number of bad loans across the board.
Foreign investors are becoming increasingly cautious due to the ballooning default loans and deepening institutional instability. According to Dr. Zahid Hussain, this is sending negative signals to the global market, damaging Bangladesh's investment climate.
On the public development front, the Annual Development Program (ADP) has seen poor implementation. In July 2025, only Tk 1,645 crore—just 0.69% of the year’s ADP allocation—was spent, down from Tk 2,922 crore (1.05%) in the same period last year. This indicates a decline in state-driven development activity despite reform promises by the interim government.
As mismanagement, political interference, and stalled reforms continue to haunt the sector, experts warn that Bangladesh’s financial system is heading toward a prolonged period of uncertainty—unless decisive, transparent, and structural changes are swiftly implemented.
Bd-pratidin English/ Jisan
