World Bank Approves $450M to Support Bangladesh’s Banking Sector

The World Bank has approved $450 million in financing to help Bangladesh strengthen its banking sector, a key step toward supporting economic growth and job creation.

The funding, provided under the Financial Sector Support Project II, will strengthen the country's deposit protection system to safeguard small depositors and enhance Bangladesh Bank's supervisory capacity and systems, according to a World Bank press release issued on 24 June.

The project will also support preparations for bank resolution mechanisms and reforms in state-owned banks. It aims to increase the capital of the deposit protection fund while advancing key reforms, including improving deposit insurance, establishing an Emergency Liquidity Assistance framework, developing bank restructuring strategies and supporting state-owned bank reforms.

Bangladesh's banking sector continues to face major challenges, including weak corporate governance, regulatory capture and related-party lending.

The non-performing loan (NPL) ratio reached 32.6% at the end of March 2026, significantly higher than the South Asian average of 7.9%. Meanwhile, the banking sector's capital-to-risk-weighted assets ratio stood at negative 2.6% at the end of December 2025.

"Bangladesh's vision of becoming a trillion-dollar economy requires a stable and inclusive financial sector. But the banking sector, which accounts for about 90% of total financial sector assets, faces mounting stress," said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

He said the project would help Bangladesh establish essential tools, systems and safeguards to protect small depositors, restore confidence and stability in the banking sector, and support economic growth and employment.

The project will also modernise Bangladesh Bank's information and communications technology (ICT) infrastructure to address growing cybersecurity risks and improve sector-wide data and analytics.

According to the World Bank, these upgrades will strengthen the central bank's ability to monitor risks, improve data-driven supervision and enhance the resilience of the financial sector.

"The project, which forms part of a coordinated approach by development partners including the IMF and the Asian Development Bank, supports measures to strengthen crisis preparedness and build the authorities' capacity to manage banking sector stress," said Toshiaki Ono, World Bank Senior Financial Sector Specialist and Task Team Leader for the project.