IMF asks why loss-making banks still paying salaries and bonuses
It also raises concerns over ‘failure’ to liquidate struggling banks in Bangladesh
The International Monetary Fund (IMF) has raised serious concerns over Bangladesh's "failure to take decisive action" against nearly two dozen banks suffering from severe capital shortfalls, questioning why these banks continue to pay salaries and bonuses to staff despite mounting losses and rising non-performing loans (NPLs).
The issue came to light during a meeting held in Dhaka yesterday between an IMF delegation and Bangladesh Bank officials, chaired by Deputy Governor Zakir Hossain Chowdhury. Discussions focused on banks' asset classification and provisioning, credit risk, and regulatory forbearance measures, according to multiple officials present at the meeting.
IMF representatives asked why financially distressed banks with high NPLs and significant capital deficits were not being liquidated.
Keep updated, follow The Business Standard's Google news channel
In response, Bangladesh Bank officials said that liquidation of banks is rare in Bangladesh. Instead, five banks have already been placed under a merger initiative, while others are implementing capital restoration plans to gradually recover from their shortfalls.
We are in a completely free-floating position – there is no intervention in the market.
Ahsan H Mansur, Governor, Bangladesh Bank
However, IMF officials expressed doubt about the effectiveness of these prolonged recovery plans, saying that it was "not sustainable for weak banks to remain in operation indefinitely" and urged Bangladesh to define a clear path for either restructuring or liquidation.
Rising capital shortfall
According to Bangladesh Bank data, the combined capital shortfall in the country's banking sector exceeded Tk1.55 lakh crore by the end of June 2025 – a sharp increase from Tk1.10 lakh crore in the previous quarter.
Out of 61 scheduled banks, 24 failed to maintain the mandatory minimum capital requirement. These include four state-owned commercial banks, two specialised banks, and 18 private commercial banks.
Central bank officials further claimed that no newly issued loans had defaulted in the past year. The current wave of defaults, they argued, stemmed from loans issued during the previous government's tenure, which were already considered risky at the time.
Exchange market still not fully free-floating, IMF says
In a separate meeting later in the day, IMF officials met Bangladesh Bank Governor Ahsan H Mansur to discuss the state of the foreign exchange market. The IMF team noted that Bangladesh's exchange rate regime still did not reflect a fully free-floating market.
Governor Mansur rejected this claim, stating, "We are in a completely free-floating position – there is no intervention in the market."
The IMF delegation then asked why the central bank was still purchasing US dollars if the market was indeed free-floating. Mansur replied, "Export- and remittance-dependent countries always buy dollars from the market. Even Japan does so."
He added that as import demand had slowed and banks held sufficient foreign currency, the central bank purchased excess dollars to stabilise the market.
Loan rescheduling and cooling period
The IMF also raised observations regarding Bangladesh's new loan rescheduling policy and the absence of a cooling period for rescheduled loans. The delegation suggested that restructured loans should not be classified as performing immediately; instead, a monitoring period should be introduced to assess the borrower's repayment behaviour.
Bangladesh Bank officials acknowledged that the current circular contains no such provision but argued that the country's lending policies toward defaulters are already stricter than those of many other nations. "Our framework reflects the realities of Bangladesh's economy," one senior official said, adding that the IMF had broadly agreed with this assessment.
