Banking Sector Poised for Post-Election Recovery

Bangladesh’s banking sector is gradually showing cautious optimism for a post-election recovery in 2026, driven by the prospect of policy clarity, political stability, and improved regulatory oversight. Industry leaders, however, emphasise that while the outlook is positive, challenges remain.

The year 2025 proved particularly testing for Bangladesh’s banks. Persistent administrative bottlenecks under the previous government, coupled with unregulated lending practices and structural weaknesses, placed significant pressure on the sector. Economic slowdown further constrained the flow of credit to the private sector. High-profile irregularities in certain banks stirred public concern, prompting intervention from the central bank to restore confidence.

A key indicator of sectoral stress has been the continuous contraction of the Net Interest Margin (NIM), which has directly impacted bank profitability and investor sentiment.

Private Sector Credit and Liquidity Trends

Data from Bangladesh Bank reveal that private sector credit grew by only 6.23% up to October 2025—the lowest rate recorded in two decades. Other critical indicators are summarised below:

Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank (MTB), reflected on 2025 as “an extremely challenging year,” but expressed hope that economic activity would revive following the elections. He cautioned, however, that liquidity pressures might persist for some time.

Mohammad Ali, CEO of Pubali Bank, echoed optimism, suggesting that political stability could restore investor confidence and accelerate economic momentum. He stressed that banks must continue to exercise prudence in lending and liquidity management.

Dr. Md. Touhidul Alam Khan, CEO of NRB Commercial Bank, highlighted the importance of sectoral reforms. “Strengthening internal audit frameworks, adopting risk-based monitoring, and implementing the Expected Credit Loss (ECL) model under IFRS 9 will be key to restoring trust in banks,” he noted.

Overall, banking leaders concur that policy transparency, political stability, and robust governance structures are critical to guiding Bangladesh’s banking sector toward sustainable post-election recovery. While challenges remain, the convergence of these factors presents a cautiously optimistic outlook for 2026.