The World Bank has approved a $450 million financing package aimed at strengthening Bangladesh’s banking sector, improving financial resilience and restoring depositor confidence at a time of sustained stress in the country’s financial system.
The decision was taken by the World Bank’s Executive Board in Washington on Wednesday. The approval was later confirmed through a statement issued by the organisation’s office in Dhaka. The funding will be implemented under the Financial Sector Support Project–2, a programme designed to reinforce the country’s banking architecture and address long-standing structural weaknesses.
At the centre of the initiative is an effort to safeguard small and retail depositors, while also enhancing the supervisory and regulatory capacity of the central bank. The programme places emphasis on improving transparency, strengthening accountability mechanisms and ensuring that banks operate under more robust governance standards.
A significant portion of the project will be directed towards reinforcing deposit protection systems. This includes expanding the capital base of the deposit protection fund to improve its ability to respond in times of financial stress. A structured liquidity support framework is also expected to be developed, allowing banks to access emergency funding under defined conditions. Alongside this, the programme supports the formulation of strategies for resolving distressed banks and advancing reforms within state-owned financial institutions.
The World Bank has highlighted persistent vulnerabilities in Bangladesh’s banking sector. Weak corporate governance, limitations in regulatory oversight and irregular lending practices have contributed to rising levels of non-performing loans. These challenges have placed sustained pressure on balance sheets across the sector.
Recent data underscores the severity of the situation. By March 2026, the non-performing loan ratio had reached 32.6 per cent, significantly higher than the South Asian regional average of 7.9 per cent. The figures reflect deep-rooted stress within the banking system and raise concerns about credit discipline and risk management practices.
Capital adequacy indicators have also deteriorated. By December 2025, the sector’s risk-weighted capital adequacy ratio stood at negative 2.6 per cent, signalling that, on average, banks do not hold sufficient capital buffers to absorb potential losses. This has added urgency to ongoing reform efforts and international financial support.
Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, said a strong and inclusive financial sector is essential if Bangladesh is to progress towards its ambition of becoming a trillion-dollar economy. He noted that the banking sector is currently under considerable strain, with structural weaknesses limiting its ability to support sustainable growth.
According to him, the new financing will help strengthen protections for small depositors, rebuild public confidence in the financial system and support the return of stability to the banking sector. He also stressed that improved financial stability is likely to encourage broader economic activity and create conditions more conducive to job creation.
As part of the wider reform agenda, the project will modernise the central bank’s information and communication technology infrastructure. Upgraded systems are expected to enhance supervisory effectiveness, improve data management and strengthen risk monitoring capabilities across the banking sector.
The initiative forms part of ongoing international support for financial sector reforms in Bangladesh, where policymakers continue to grapple with the dual challenge of stabilising banks while fostering long-term economic growth.