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Experts at a workshop on the monetary policy statement warned that deep-rooted governance failures, a surge in non-performing loans (NPLs) and weak policy coordination have emerged as major threats to stability of Bangladesh's banking sector.
They revealed that the actual NPL ratio has climbed to 35.7 per cent -- far above previously reported levels -- underscoring the urgent need for transparency and structural reform.
Experts also cautioned that ad hoc implementation of monetary policy, coupled with a fiscal-monetary disconnect, is undermining inflation control and eroding public confidence.
The observations were made at a workshop titled "Monetary Policy Statement: Relevance for Banks", organised by the Bangladesh Institute of Bank Management (BIBM) at its Dhaka campus on Wednesday.
Speaking at the event, Ahsan Ullah, adviser to former Bangladesh Bank governor Ahsan H Mansur, disclosed that the banking sector's actual NPL ratio stands at 35.7 per cent, acknowledging that bad loans had long been kept "under the carpet".
Transparency, he said, is essential to prescribe the right corrective measures.
Dr Akhand Mohammad Akhtar Hossain, chief economist of the central bank, described the monetary policy environment as "ad hoc" and pointed to an "interlocking credit market system" involving vested interests that distort credit allocation.
He noted that high nominal interest rates during inflationary periods tend to attract poor-quality borrowers, creating moral hazard.
Speakers highlighted a persistent "blame game" between the central bank and the Ministry of Finance, arguing that a lack of coordination weakens the effectiveness of inflation targeting.
While the central bank aims to bring inflation down to 4.0-5.0 per cent, current pressures -- driven by global fuel prices, domestic supply disruptions and structural rigidities -- continue to weigh on price stability.
Mohammad Ali, managing director and chief executive officer of Pubali Bank PLC, warned that rising government borrowing -- exceeding Tk 1.3 trillion from the banking system -- risks crowding out private sector credit.
He also observed a "flight to quality", with sound borrowers shifting to better-governed banks.
The keynote paper, presented by Mahmud Salahuddin Naser, executive director (research) at the Monetary Policy Department of Bangladesh Bank, outlined forward-looking initiatives, including risk-based supervision from January 2026, resolution planning for weak banks, strengthened governance, asset recovery efforts, bond market development, and the promotion of financial inclusion and a cashless economy.
Deputy Governor Nurun Nahar said the monetary policy statement serves as a strategic compass for banks, guiding interest rate risk management, liquidity planning, credit strategy and compliance frameworks.
The event was chaired by Dr Md Ezazul Islam, director general of BIBM, who underscored the need for research-driven dialogue to build a resilient and forward-looking banking sector.
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