Central Bank Refuses Bailouts for Failing Lenders Amid Strong Remittance Growth

Amid growing public unease over the health and resilience of Bangladesh’s banking system, Bangladesh Bank has adopted a notably firm and carefully articulated position, seeking to remove ambiguity about its role during periods of financial distress. With non-performing loans (NPLs) continuing to climb and several commercial banks showing signs of acute vulnerability, the central bank has made it abundantly clear that it will not act as a direct guarantor of depositors’ funds in troubled institutions. The responsibility to protect deposits and honour withdrawal requests, officials insist, rests squarely with the banks themselves.

This stance was reaffirmed at a press briefing on Wednesday, 17 December, where Bangladesh Bank’s Executive Director and official spokesperson, Arif Hossain Khan, disclosed figures that underscore the severity of the situation. By the end of September, no fewer than 17 commercial banks were reported to have NPL ratios exceeding 50 per cent—a threshold widely regarded by financial analysts as a red flag for institutional solvency, depositor confidence, and systemic stability. Such levels suggest prolonged weaknesses in credit governance and risk management, rather than isolated lapses.

Despite the mounting pressure, the central bank has ruled out dramatic rescue measures such as nationalisation, forced mergers, or direct takeovers of failing banks. Instead, it intends to reinforce accountability through existing legal and regulatory channels. Mr Khan emphasised that banks unable or unwilling to return depositors’ funds would be compelled to do so through legal means, including court action where required. Bangladesh Bank, he noted, would maintain its supervisory role and policy oversight, but would not assume financial liability on behalf of errant institutions.

This approach reflects a conscious effort to restore market discipline and discourage the culture of reckless lending that has contributed to the current malaise. By drawing a clear boundary between regulation and financial responsibility, the central bank hopes to ensure that bank owners and senior management remain answerable for their decisions, rather than transferring the cost of mismanagement to taxpayers.

While domestic banking woes persist, developments on the external front have provided a measure of reassurance. Remittance inflows have risen sharply, offering critical support to foreign exchange reserves and easing broader macroeconomic pressures. Official data show that Bangladesh received 1.707 billion US dollars in remittances during the first 14 days of December alone, averaging roughly 121.9 million dollars per day. This represents a notable improvement compared with the same period last year, when inflows totalled 1.381 billion dollars.

A particularly striking milestone was recorded on 14 December, when expatriate Bangladeshis sent home nearly 200 million dollars in a single day. Overall, remittances from July to 14 December in the current fiscal year reached 14.746 billion dollars, reflecting a robust year-on-year growth of 17.80 per cent.

Recent Monthly Remittance Inflows

Bangladesh Bank attributes this sustained rise to tighter surveillance against informal transfer channels, enhanced cash incentives for expatriate workers, and increasing trust in formal banking mechanisms. While the surge in remittances has offered welcome relief, officials acknowledge that restoring discipline within the banking sector and rebuilding depositor confidence remain among the most formidable challenges facing the financial system in the months ahead.