World Bank Approves $450 Million for Banking Sector Reforms
Graphics: Agamir Somoy
The World Bank has approved a $450 million loan to support reforms in Bangladesh’s banking sector. The financing aims to strengthen the sector’s foundation, ensure protection for small depositors, and enhance the supervisory capacity of Bangladesh Bank. It will also support economic recovery and job creation.
The World Bank’s Executive Directors approved the financing on June 23 in Washington. The loan will be provided under the Financial Sector Support Project-2.
The project primarily aims to strengthen protection for small depositors. It will also enhance Bangladesh Bank’s supervisory framework and institutional capacity. In addition, the project will help address challenges in the banking sector and lay the groundwork for reforms in state-owned banks.
Under the project, authorities will increase the capital of the Deposit Protection Fund and improve the deposit protection system. They will establish an effective Emergency Liquidity Assistance framework and formulate a bank resolution strategy. The project will also support reforms in state-owned banks.
According to the World Bank, Bangladesh’s banking sector currently faces a range of challenges, including weak corporate governance, undue influence over regulatory authorities, and a tendency to extend loans to related parties.
As of the end of March 2026, the country’s non-performing loan ratio stood at 32.6 percent. By comparison, the average non-performing loan ratio among South Asian banks was 7.9 percent. At the end of December 2025, the banking sector’s capital adequacy ratio against risk-weighted assets was negative 2.6 percent.
Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, said Bangladesh needs a stable and inclusive financial sector to achieve its goal of becoming a $1 trillion economy. However, the country’s banking sector is currently under pressure. He said the project will help protect small depositors and restore confidence, strengthen stability in the banking sector, and accelerate economic growth and employment generation.
The project will modernize Bangladesh Bank’s information and communication technology (ICT) infrastructure. It will strengthen capacity to address cybersecurity risks and improve sectoral data and analytical systems. As a result, risk monitoring and data-driven supervision will become more effective.
Toshiaki Ono, Senior Financial Sector Specialist at the World Bank and Task Team Leader for the project, said, “This project forms part of a coordinated effort with development partners, including the IMF and the Asian Development Bank. It will help strengthen the authorities’ capacity to prepare for crises and manage pressures in the banking sector.”
