Staff reporter:
Banking experts have called for specialized legal
mechanisms, a national asset management company and stronger supervision to
address the banking sector’s mounting bad-loan burden, estimated at nearly
Taka 6 lakh crore.
They today made the call at the second day of the 11th Annual Banking
Conference held at the Bangladesh Institute of Bank Management (BIBM) in
Mirpur-2 in the city, said a press release.
In his keynote paper, Dr. Barkat-e-Khuda, former professor and chairman of
the Department of Economics at the University of Dhaka and former Dr Muzaffer
Ahmad Chair Professor at BIBM, outlined a series of measures to address the
sector’s major challenges and accelerate economic growth.
He called for specialized legal mechanisms, including the proposed Distressed
Asset Management Act (DAMA) and the Insolvency and Bankruptcy Act, to deal
with the massive volume of non-performing loans (NPLs).
He also emphasized strengthening Bangladesh Bank’s supervision, conducting
independent audits and establishing a national asset management company to
manage legacy bad debts.
The keynote paper recommended holding willful defaulters of state-owned
commercial banks legally and financially accountable, including through asset
freezes and enforcement of single-borrower exposure limits.
Dr. Barkat-e-Khuda further called for operationalizing the Bank Resolution
Department and the Bank Restructuring and Resolution Fund (BRRF) to conduct
asset quality reviews (AQRs) and implement prompt corrective action (PCA)
measures.
He also stressed addressing structural weaknesses affecting the advance-
deposit ratio (ADR), including high NPLs, weak credit demand in productive
sectors and inadequate liquidity management.
Comprehensive bankruptcy laws and the removal of judicial bottlenecks
delaying loan recovery are also necessary, he said.
Professor Dr Mahbub Ullah, national professor and former professor and
chairman of the Department of Development Studies at the University of Dhaka,
attended the conference as the chief guest.
Chairing the session, BIBM Director General Dr. Md. Ezazul Islam said NPLs
accounted for roughly one-third of outstanding bank loans as of June 2026.
Governance failures, capital and provisioning shortfalls, money laundering
and productivity constraints continued to weaken the banking sector, he said.
Highlighting the uneven distribution of liquidity across the banking system,
Dr. Islam said some banks were facing severe liquidity stress while
substantial excess liquidity remained elsewhere in the system.
“This is a reminder that rebuilding trust and directing funds towards viable
investment matter just as much as the availability of funds,” he said.
He called for credible and coordinated reforms focusing on stronger
supervision, independent governance, transparent asset quality reviews,
effective recovery and resolution of distressed loans, adequate capital
buffers and robust depositor protection.
Digital tools, including improved credit assessment and transaction
monitoring, could support the reform process, he said, adding that technology
must be accompanied by professional ethics, skilled personnel and
institutional accountability.
“Above all, a healthier banking sector should expand responsible financing
for productive businesses, agriculture and CMSMEs,” he added.
The two-day conference features 13 plenary sessions and presentations of 104
research papers, bringing together more than 800 expected participants,
including policymakers, bankers, researchers, academics and students from
home and abroad.
BIBM has been organizing the Annual Banking Conference since 2012, providing
a platform for experts and researchers to exchange knowledge and discuss
emerging challenges and sustainability issues in banking, finance and the
economy.
