Bankers in Bangladesh are cautiously optimistic about a potential revival of the nation’s beleaguered banking sector, banking on policy predictability and post-election stability in the coming year.
The year 2025 proved exceptionally challenging for the banking industry, beset by a combination of mismanagement legacies, misdirected lending, and systemic inefficiencies inherited from prior regimes. These issues were compounded by an economic slowdown, declining private-sector credit flow amid a high-interest-rate environment, and episodic panic withdrawals following irregularities in a handful of non-compliant banks that necessitated regulatory intervention.
One of the most visible indicators of stress has been the contraction of the sector’s net interest margin (NIM), which narrowed consistently throughout 2025, squeezing bank profitability.
Private-Sector Credit and Liquidity Trends
Data from Bangladesh Bank indicates that private-sector credit fell to just 6.23% by the end of October 2025, marking the lowest level in over two decades.
| Indicator | End-2025 Value | Notes |
|---|---|---|
| Private-sector credit growth | 6.23% | Lowest in 20+ years |
| Net Interest Margin (average) | Declining | Pressure on profitability |
| Government securities investment | Increasing | Banks seek risk-free returns |
| Central bank FX purchase | $3.14 billion | Injected ~Tk400 billion liquidity |
Managing Director and CEO of Mutual Trust Bank (MTB) PLC, Syed Mahbubur Rahman, describes the year as “exceptionally challenging.” He expects a post-election rebound in economic activity but warns that liquidity pressures will persist. Rahman stresses that government efforts in revenue mobilisation are critical to alleviating these pressures, particularly as domestic borrowing by the government could crowd out private-sector lending.
Mohammad Ali, Managing Director and CEO of Pubali Bank PLC, is more upbeat, predicting that the upcoming February election will pave the way for political stability, restoring investor confidence and stimulating economic activity. He underscores that commercial banks will need rigorous liquidity management to ensure credits flow into productive sectors. Ali also anticipates a drop in non-performing loans (NPLs) once year-end classified loan data is reconciled.
Dr. Md. Touhidul Alam Khan, Managing Director and CEO of NRBC Bank, emphasises that the sector stands on the cusp of a major transformation, contingent on a politically neutral, professionally managed banking system. He advocates comprehensive internal audit frameworks, risk-based supervision, and adoption of an Expected Credit Loss (ECL) model in line with IFRS 9 to reinforce sector credibility.
A treasury executive at a leading private commercial bank, speaking anonymously, cautions that while policy support is essential, extending grace periods to struggling borrowers could intensify short-term liquidity pressures. “2025 has been a learning year,” he notes. “Banks will exercise far greater prudence in issuing new loans.”
Looking ahead, the consensus among banking leaders is that a combination of policy clarity, political stability, and strengthened governance frameworks could catalyse a sustainable turnaround in Bangladesh’s banking sector.