Govt prioritises banking reforms to rebuild trust
Budget measures include recapitalisation of distressed banks, reduce political interference in banking operations
The government has identified restoring confidence and strengthening discipline in the banking sector as key medium-term priorities in the budget for 2026-27 fiscal year, as it seeks to support economic recovery, revive investment and address deep-rooted weaknesses in the financial system.
Presenting the proposed budget in the parliament yesterday, Finance Minister Amir Khosru Mahmud Chowdhury said the government had already allocated around Tk40,000 crore in the current fiscal year to recapitalise distressed banks and was pursuing a series of reforms aimed at improving governance and reducing political influence in the sector.
The minister said political appointments and interference in bank management had been halted and that amendments had already been introduced to reduce family influence and control over banks.
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Only visible action can help rebuild confidence and bring discipline.
"Necessary amendments to the law have been made to free the banking sector from family influence and control," he said.
He added that measures were also being taken to reduce non-performing loans, improve transparency in loan approval and rescheduling processes, and strengthen accountability in bank management.
Ahsan H Mansur, former governor of Bangladesh Bank, said only visible action can help rebuild confidence and bring discipline.
"We had proposed amendments to the Bank Companies Act to limit excessive family control in banks. If those amendments are implemented, we will understand that the government is genuinely serious about reducing concentrated control. We would like to see those reforms materialise," he told TBS.
Mansur emphasised the need to strengthen the independence of Bangladesh Bank. "From the very beginning, we have emphasised the need to ensure the independence of the central bank. In this regard, a draft proposal was submitted to the parliament to strengthen the autonomy of Bangladesh Bank," he said.
"If that proposal is implemented, Bangladesh Bank will become truly independent, and only then can interference be reduced. Interference will not disappear automatically," said the former governor.
Sohail RK Hussain, managing director of Bank Asia, said the budget has rightly emphasised restoring confidence in the banking sector and addressing capital deficiencies. However, he said, recapitalisation alone is not enough.
"Banks must also change the way they operate by reducing costs, improving loan quality, and strengthening monitoring and oversight," Sohail said.
He argued that political influence and interference were major causes of the banking sector's problems in the past. "If the current government wants to rehabilitate troubled banks, it must ensure that they remain free from political pressure and demands."
