When the Awami League government was ousted amid widespread student and public protests, Bangladesh’s banking sector was in a state of deep crisis. A severe shortage of foreign currency left businesses struggling, driving inflation, while several banks reportedly controlled by the S Alam Group were allegedly being funded through unchecked money creation. Alongside the currency crisis, the overall discipline and regulatory oversight of the banking system had broken down entirely.
In this context, economist Ahsan H. Mansur was appointed governor of Bangladesh Bank on 14 August 2024. With years of experience at the International Monetary Fund (IMF), Mansur brought expertise in economic recovery and institutional reform. Over his one-and-a-half-year tenure, he alleviated much of the dollar and taka crises, initiated the consolidation of five troubled banks, and tightened money supply to control inflation. Policy interest rates were raised, which in turn increased lending rates, slowing the pace of business and investment.
Shortly after the BNP government assumed office, Mansur was removed from the governorship just ten days into their tenure. Businessman Mostaque Rahman was appointed as the new governor, inheriting a banking sector still navigating the aftershocks of previous instability and ongoing reforms.
Key Challenges Ahead
The BNP government, having won the 13th National Parliamentary elections, campaigned on a promise to ensure governance reforms in the banking sector, strengthen oversight of financial institutions, enhance the autonomy of Bangladesh Bank, and eventually abolish the Banking Division. Analysts stress that the new administration must continue the reform measures started under Mansur to sustain stability.
Critical priorities for the new governor include restoring depositors’ confidence, completing bank consolidation initiatives, aligning banking regulations with international standards, and preventing fresh instances of financial malpractice. The government is also expediting amendments to the Bank Companies Act and Bangladesh Bank Order to strengthen legal frameworks, while maintaining strict vigilance against financial crimes and money laundering.
Anis E. Khan, former chairman of the Association of Bankers, told The Daily Star: “Significant challenges remain in the banking sector. The reform process must continue, bank consolidation completed, and professional independent directors installed to ensure good governance. Recovery of non-performing loans and repatriation of embezzled funds must remain a top priority.”
Current Status of the Banking Sector
When Mansur assumed office in August 2024, the dollar was surging and foreign exchange reserves were low. By introducing market-based foreign exchange policies, the dollar crisis eased, remittances began to rise, and reserves increased from $25.92 billion on 5 August 2024 to $35.04 billion recently (IMF’s BPM6 accounting: $30.3 billion). The exchange rate stabilised around 122–123 taka per US dollar.
Despite these improvements, non-performing loans (NPLs) surged due to previously hidden defaults. The NPL ratio rose from 12.56% in June 2024 to 35.73% by September, amounting to nearly BDT 6.5 trillion. Several banks previously mismanaged under Awami League-aligned interests—such as First Security, Social Islami, Union, Global Islami, and Exim—were consolidated into the Sammilito Islami Bank, though the process remains incomplete. Six additional financial institutions are slated for closure.
Investigations into alleged misconduct involving major industrial groups—including S Alam, Beximco, Nabil, Summit, Orion, Jemcon, NASA, Bashundhara, Sikder, and Aramit—were launched during Mansur’s tenure. Bangladesh Bank is pursuing recovery of embezzled funds both domestically and internationally, establishing agreements with foreign institutions where necessary.
To curb inflation, Mansur used policy interest rates as a primary tool, raising rates above 14%, which reduced inflation to approximately 8.5%. However, higher lending rates have slowed investment and commercial activity, according to business observers.