Dr. Salehuddin blames previous regime for ravaged financial sector

The government has taken a number of reform initiatives to address long-standing structural challenges in the banking sector with establishing good governance through restoring depositors' confidence. Finance Adviser Dr. Salehuddin Ahmed in his budget proposal on Monday for fiscal year 2025-2026 said although non-performing loans (NPL) increased enormously due to unprecedented embezzlement and corruption in the financial sector during the previous government, the real condition of the financial sector was kept hidden through repeated rescheduling of defaulted loans.

However, the interim government has adopted the Loan Lease Classification and Provisioning System according to international standards (BASEL-III Regulations). As a result, the total amount of NPL in this sector has increased from 10.11 percent in June 2023 to 20.20 percent in December 2024, Dr. Salehuddin Ahmed said.

To ascertain the real scenario of this sector, steps have been taken to determine the real condition of the banks through Asset Quality Review (AQR), Dr. Salehuddin Ahmed informed. During the last 15 years, he said, the financial sector has been taken to the brink of a complete breakdown through unprecedented anarchy and millions of crores Taka from bank deposits have been siphoned off. "Against the backdrop of the political changes after August 5, 2024, our government has undertaken important reforms to address long-standing structural challenges in the banking sector, to establish good governance and restore depositors' confidence," the Finance Adviser said. As part of this, the board of directors of several banks has been reconstructed.

The Bank Resolution Ordinance, 2025 has been promulgated to ensure timely resolution of capital deficit, liquidity crisis, bankruptcy or existential risks and ensure financial stability, according to the budget speech of the Finance Adviser. "Work is underway to amend the Bangladesh Bank Ordinance, 1972 and enact the weak asset management law," according to the budget document. As part of the reforms, three task forces have been formed whose main objectives are: (a) comprehensive qualitative review of the assets of the banks to form the basis of banking sector reform program, (b) increase the capacity and efficiency of Bangladesh Bank (BB) to ensure effective implementation of policies and regulations and maintain good governance in the banking system, and (c) take effective initiatives to recover stolen/laundered assets, according to the budgetary speech.

Simultaneously, the Financial Stability Committee of Bangladesh Bank has been formed to understand the dynamics of the financial sector and determine the steps to be taken to retain stability in the financial administration, Dr. Salehuddin Ahmed stated.