Dhaka: Bangladesh Bank Governor Dr Ahsan H Mansur today said the country has successfully navigated a difficult economic phase and is now moving steadily towards stability, backed by strong macroeconomic fundamentals and wide-ranging reforms in the banking sector. Speaking at a seminar on 'Banking Sector Reforms: Challenges and the Way Forward,' as the chief guest at the Economic Reporters Forum (ERF), the Governor emphasized the importance of preserving public confidence in banks, restoring macroeconomic stability, and addressing structural weaknesses as key priorities for the central bank.
According to Bangladesh Sangbad Sangstha, the Governor noted that while confidence in the banking sector has not been fully restored, it has been largely maintained despite prolonged stress. He highlighted that maintaining confidence is a significant achievement during challenging times, as depositors have continued to show patience and cooperation.
Highlighting the country's macroeconomic performance, Dr Mansur said Bangladesh's balance of payments position is currently robust, with the financial account in a substantial surplus and the overall external balance remaining positive. He assured that the foreign exchange reserves have increased this year, and the risk of economic collapse is minimal, even with the upcoming election. The external sector stability has been restored faster than expected, achieving in one year what was projected to take two to three years.
On the topic of exchange rate management, the Governor stated there is no immediate concern. Bangladesh Bank has purchased over US$2.5 billion from the foreign exchange market through transparent, market-based mechanisms and will only intervene when necessary to ensure stability. He emphasized the central bank's policy of building reserves from the country's own economy rather than relying on external borrowing.
The Governor also discussed the central bank's target to raise foreign exchange reserves to around US$34-$35 billion by the end of the year, a goal that will be pursued regardless of IMF disbursements. He stressed that the real value of the IMF lies in technical support, not financing.
Turning to banking sector reforms, Dr Mansur identified persistent challenges such as weak governance in some institutions, capital shortfalls, and a high level of non-performing loans (NPLs). He asserted that transparency in data disclosure is crucial, as the true NPL ratio stands at around 36 percent and concealing data would only delay reforms.
Governance measures have included dissolving the boards of 14 banks and issuing clear warnings that governance failures will lead to intervention. In some cases, restrictions on banks demonstrating strong deposit mobilization have been eased based on performance monitoring.
The central bank Governor also announced the merger of five weak banks, ensuring depositor protection through an expanded deposit insurance scheme and a new alternative account mechanism. The merged entity is expected to become one of the strongest banks in the country, with high paid-up capital and adequate liquidity.
For non-bank financial institutions, Dr Mansur indicated that resolution would primarily involve liquidation, with depositor interests prioritized. He also mentioned restrictions on dividend and bonus payments for non-profitable banks or those with capital shortfalls, with accountability extending to boards and management.
Looking forward, the Governor highlighted the need for comprehensive financial sector reform, including legal reforms to strengthen the bank resolution framework, deposit insurance, loan recovery laws, and the establishment of an asset management company. He also stressed the importance of strengthening Bangladesh Bank's independence and emphasized initiatives on financial inclusion and bond market development.
Dr Mansur concluded by expressing confidence that sustained reforms and accountability will ensure a resilient and stable banking system for Bangladesh, with clear direction despite remaining challenges.