Bangladesh Bank Seeks to Scrap ‘Unworkable’ Bank Ownership Return Provision

Bangladesh Bank has recommended deleting Section 18(a) of the Bank Resolution Act, a provision that allows previous owners to reclaim merged troubled banks, deeming it unworkable.

Governor Md Mostaqur Rahman shared this view during a meeting on Monday with the Editors' Council at the central bank headquarters in Dhaka. The council, representing the country's leading print media, had expressed deep concern over the provision and urged closer scrutiny to protect the banking sector.

Explaining the rationale for the removal, Governor Rahman said, "There is no scope to apply this provision. The government has already invested nearly Tk 520 billion in five merged Islamic banks, now operating together as Sammilita Islamic Bank."

He noted these banks hold Tk 1.32 trillion in deposits, Tk 320 billion in performing loans, and a staggering Tk 1.64 trillion in non-performing loans (NPLs). "With an estimated recovery of only Tk 200 to 300 billion, there will be a shortfall of at least Tk 650 billion. It is unlikely anyone will step forward to reclaim ownership. Two months have passed since the law's adoption, and no one has shown interest," he added.

Led by Editors' Council President and New Age Editor Nurul Kabir, the council discussed rising NPLs, the need for good governance, depositor security, and stability in the foreign exchange market. Following the meeting, Kabir noted the governor had outlined ongoing reforms and assured the council that necessary measures are underway.

The dialogue also covered recent instability at Islami Bank Bangladesh PLC, inflation control, investment conditions, and the proposed national budget. The Editors' Council stressed the absolute need for transparency, accountability, and stability in the sector.

Sector Reforms and Asset Recovery A Bangladesh Bank press release confirmed the governor briefed editors on the central bank's comprehensive reform agenda. Updating the council on bank mergers, Rahman said administrative changes are complete, and the process will accelerate once the banks upgrade their Core Banking Systems (CBS).

To tackle default loans, the governor announced upcoming amendments to the money loan court system to expedite case settlements. He added that a new distressed asset management company act will be formulated to handle unrecoverable assets effectively.

The governor also shared a major breakthrough in asset recovery: central bank efforts successfully froze $25 million in laundered funds in the United Kingdom, which will soon be repatriated to Bangladesh.

Depoliticization and Digital Transformation Stressing the need to "depoliticize" the banking sector, Rahman stated that reforms are heavily focused on ensuring professionalism and good governance. He strongly opposed political parties owning banks, arguing that a bank must retain the confidence of the general public. He highlighted recent regulatory actions taken at large banks, including board restructuring and management changes at Islami Bank Bangladesh PLC, as vital steps to protect depositors.

Looking forward, Rahman outlined plans for an integrated digital financial ecosystem. Initiatives include:

• Expanding digital payment and agent-banking services.

• Introducing AI-based credit assessments.

• Launching a "One Citizen, One Identity, One Wallet" system.

• Driving wider adoption of the Bangla QR code to accelerate cashless transactions, enhance security, and boost government revenue.

Policy Adjustments Additionally, the governor assured the council that requests for foreign currency exceeding the approved limit for medical treatment abroad are being expedited upon application. To help lower commodity prices, the central bank has also reduced the interest rate on funds used for bill discounting under the UPAS (Usance Payment at Sight) facility.