For years, the banking sector has served as a cautionary tale of politically connected finance. Its reputation has been marred by rising non-performing loans, a culture of impunity for influential defaulters, and the anomalous status of struggling state-owned banks. Against this backdrop, the 45 proposed amendments to the Bank Company Act mark the most significant effort at financial reform in decades. The changes aim to establish unified oversight by the central bank over all lenders, a move widely regarded as essential.
One of the most overdue measures is the abolition of the “specialised bank” status for state banks. This designation has effectively placed some institutions in a regulatory grey area, allowing them to operate with capital adequacy exemptions and make senior appointments without central bank approval. The result has been disastrous: state banks have become the primary repositories of non-performing loans, with balance sheets crippled by politically connected borrowers.
The proposed ban on sitting MPs, cabinet members, and local government representatives serving as bank directors strikes directly at the long-standing nexus between politics and finance, which has dictated credit flows for decades. Equally significant are the tightened rules on family directors, including stricter caps, a broader definition of family, and mandatory “cooling-off” periods.
If implemented, these reforms will dismantle opaque corporate structures that enable excessive related-party lending. Reducing board sizes and requiring at least half of all directors to be independent professionals could revolutionise governance in a sector long dominated by relatives and political allies. As Nazrul Huda, former deputy governor of the central bank, notes, smaller, expert boards are far more effective.
Some nuanced changes reveal pragmatism. Removing the controversial “wilful defaulter” category, introduced in 2023, eliminates a subjective and easily manipulated distinction while simplifying recovery processes. A single, clear defaulter list is more transparent and enforceable.
Of course, drafting legislation is only the first step. The true test will be its adoption and implementation. The clause barring politicians from boards will inevitably provoke opposition, yet the government must remain steadfast. To progress economically, Bangladesh needs a stable banking system; years of malpractice have concentrated risk, undermined depositor trust, and required costly bailouts. These amendments, if pursued decisively, could finally align the banking sector with international standards and secure the financial stability essential for future growth.