Remittance Incentive Arrears Strain Banks

Bangladesh’s banking sector is facing mounting pressure due to substantial arrears in government remittance incentives. Commercial banks are reportedly owed more than BDT 4,000 crore, placing significant stress on their liquidity and overall profitability. Medium-sized and smaller banks, in particular, are feeling the brunt of this financial burden.

Under the government’s remittance incentive scheme, banks disburse a 2.5% cash incentive to families receiving funds from migrant workers. Subsequently, the government reimburses the banks via Bangladesh Bank. However, reimbursements have been effectively delayed for almost three months this fiscal year, compelling banks to utilise their own resources to honour these obligations.

According to sources at the Ministry of Finance, arrears stood at approximately BDT 3,500 crore by November 2025, with an additional BDT 500 crore accruing in December alone. During the first 17 days of December, remittance inflows surpassed USD 20 billion, further intensifying the pressure on banks to meet incentive commitments.

Economist Zahid Hussain has highlighted the risks, stating, “Banks are effectively subsidising government obligations from their own funds. Prolonged delays can jeopardise operational efficiency and financial stability.”

The following table presents outstanding remittance incentives for major banks as of 30 November 2025:

Bank officials note that reimbursements previously occurred within one month, but current delays range from three to five months. Consequently, banks must fund incentives internally, limiting their ability to invest in higher-yielding opportunities, including 364-day Treasury bills offering 10.72% interest.

For example, a USD 100,000 remittance (at an exchange rate of BDT 122.30 per USD) generates a liability of over BDT 1.22 crore for the bank, which currently has to be covered from internal funds. This burden disproportionately affects medium and smaller banks compared to their larger counterparts.

A spokesperson for Bangladesh Bank, Arif Hossain Khan, has reassured that all outstanding incentives will ultimately be settled, emphasising that there is no risk of permanent default. Analysts recommend that the government urgently reassess its management of incentive funds and expedite arrears clearance to mitigate long-term stress on the banking sector, especially as remittance inflows continue to grow.