The World Bank has approved a USD 450 million loan to strengthen Bangladesh’s banking sector, aiming to reinforce its foundations, improve stability and support broader economic growth and job creation. The decision was endorsed by the institution’s Board of Executive Directors and confirmed by its Dhaka office through a statement issued on Wednesday (24 June), following approval at its headquarters in Washington a day earlier.
The financing will be channelled through the “Financial Sector Support Project-2”, which is designed to address long-standing structural weaknesses in the country’s banking system. Central to the programme is the strengthening of deposit protection mechanisms to safeguard small savers, alongside enhanced supervisory capacity within the central bank.
A significant portion of the project will focus on improving the regulatory and oversight framework of Bangladesh Bank. This includes building more robust monitoring systems, strengthening early warning tools, and enhancing the institution’s ability to manage risk across the sector. The initiative also seeks to modernise approaches to bank resolution and restructuring, particularly in relation to state-owned banks that have faced persistent governance and operational challenges.
According to the World Bank, Bangladesh’s banking sector is currently under considerable strain, driven by weak corporate governance, regulatory shortcomings and concerns over improper lending practices. Non-performing loans are estimated to have reached 32.6 per cent by the end of March 2026, a level significantly higher than the South Asian regional average of 7.9 per cent. In addition, the sector’s capital adequacy has deteriorated sharply, with the risk-weighted capital ratio recorded at minus 2.6 per cent at the end of December 2025.
World Bank officials argue that restoring confidence in the financial system is essential for sustaining Bangladesh’s long-term growth ambitions, including its aspiration to develop into a trillion-dollar economy. As the banking sector accounts for roughly 90 per cent of total financial system assets, its stability is viewed as central to wider economic performance.
Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, said a stable and inclusive financial system is a prerequisite for achieving these goals. He noted that the sector is currently facing severe pressure, and stressed that stronger safeguards for depositors and improved regulatory tools would help rebuild trust in the system.
The project will also support the modernisation of Bangladesh Bank’s information and communication technology infrastructure. This is expected to improve cyber security resilience, close data gaps, and strengthen data-driven supervision. Enhanced technological capacity is seen as a key step towards more effective risk-based oversight and improved financial sector resilience over the medium term.
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