The International Monetary Fund (IMF) has voiced serious concern over Bangladesh’s failure to take decisive action against several loss-making banks with severe capital shortfalls, questioning why these institutions continue to pay salaries and bonuses despite their fragile financial positions.
The issue was raised during a meeting in Dhaka on Sunday between IMF representatives and officials of the Bangladesh Bank, chaired by Deputy Governor Zakir Hossain Chowdhury. The discussions centred on asset classification, credit risk, and regulatory forbearance in the banking sector, according to officials present at the meeting.
IMF delegates asked why banks burdened with high non-performing loans (NPLs) and capital deficits had not been liquidated. In response, central bank officials explained that bank liquidation is uncommon in Bangladesh. They said five struggling banks were already being merged, while others were following capital restoration plans aimed at long-term recovery.
However, IMF officials expressed scepticism over the effectiveness of such gradual recovery efforts, describing them as “unsustainable” and urging Bangladesh to define a clear policy framework for restructuring or liquidation of weak banks.
Rising Capital Shortfalls
According to Bangladesh Bank data, the total capital shortfall in the country’s banking sector rose to Tk1.55 lakh crore by the end of June 2025, up sharply from Tk1.10 lakh crore in the previous quarter.
Out of 61 scheduled banks, 24 institutions failed to meet the minimum capital adequacy requirement. These include four state-owned commercial banks, two specialised banks, and 18 private commercial banks.
Central bank officials maintained that no new loans had defaulted in the past year, attributing the current wave of defaults to legacy loans sanctioned during the previous government’s tenure, many of which were already considered risky.
Dispute over Exchange Rate Flexibility
In a separate meeting later in the day, IMF officials met Bangladesh Bank Governor Ahsan H Mansur to discuss the foreign exchange market. The IMF delegation observed that Bangladesh’s exchange rate system was not yet fully free-floating.
Governor Mansur rejected the claim, stating, “We are in a completely free-floating position – there is no intervention in the market.” When questioned about the central bank’s continued purchase of US dollars, Mansur explained, “Export- and remittance-dependent countries always buy dollars from the market. Even Japan does so.” He added that as import demand had slowed and banks held adequate reserves, the central bank had intervened only to stabilise the market.
IMF Calls for Loan Rescheduling Reforms
The IMF also raised concerns over Bangladesh’s loan rescheduling policy, particularly the absence of a cooling period for rescheduled loans. The delegation suggested that such loans should not be classified as performing immediately, but rather monitored over a defined period to assess repayment behaviour.
Bangladesh Bank officials acknowledged that the current circular lacks such a clause but insisted that the country’s policies toward defaulters are already stricter than in many other economies. A senior central bank official remarked, “Our framework reflects the realities of Bangladesh’s economy,” adding that the IMF had largely accepted this reasoning.