Dhaka: The Asian Development Bank (ADB) today approved a US$500 million policy-based loan aimed at stabilizing and reforming the banking sector in Bangladesh through enhanced regulatory supervision, improved corporate governance, and increased asset quality and stability.
According to Bangladesh Sangbad Sangstha, the initiative, known as the Stabilizing and Reforming the Banking Sector Program, Subprogram 1, will focus on policy reforms designed to bolster the resilience of the finance sector. Key areas of focus include improving governance within the banking sector, enhancing the liquidity management framework of Bangladesh Bank, and implementing immediate measures to address significant nonperforming loans.
The program’s measures will facilitate phased compliance with international banking norms, leading to improved integrity in asset quality information. ADB Principal Financial Sector Specialist Sanjeev Kaushik noted that the banking sector faces constraints such as insufficient asset quality, tight liquidity, and a lack of financial intermediation, which contributes to low financial inclusion rates.
Kaushik emphasized that the program will add significant value by building regulatory capacity to ensure compliance with international norms, strengthening the banking sector’s capitalization, and improving access to affordable finance for micro, small, and medium enterprises. Effective financial intermediation is crucial for business enterprises to access credit and for individuals to obtain financial services, as the banking sector has traditionally catered to industrial segments and creditworthy borrowers.
The program also aims to enhance the banking sector’s digital infrastructure, facilitating longer-term financing sources and promoting greater, cost-effective financial inclusion. ADB, a leading multilateral development bank, has been supporting inclusive, resilient, and sustainable growth across Asia and the Pacific since its founding in 1966. ADB is owned by 69 members, with 50 from the region, and works with its members and partners to tackle complex challenges through innovative financial tools and strategic partnerships.