Bangladesh has far more banks than its economy requires and should operate with no more than 10 to 15 institutions, Bangladesh Bank Governor Ahsan H Mansur has said, signalling a sweeping push to consolidate the country’s overstretched financial sector.
Speaking at a seminar on the banking industry at Jagannath University in Dhaka on Wednesday, Mansur said the current number of banks, 61 in total, has made effective regulation and good governance increasingly difficult. He said the central bank is considering mergers that would reduce the number of state-owned banks to just two.
“There are currently far more banks than necessary,” Mansur said. “Given the reality of our economy, 10 to 15 banks would be sufficient. A smaller number of banks would make it easier to ensure proper governance and oversight.”
The governor painted a stark picture of the sector’s health, warning that years of malpractice, irregular lending and family-based control have pushed parts of the banking system to the brink of collapse. He estimated that around Tk 3 lakh crore has been syphoned off from the sector, with a significant share believed to have been laundered overseas.
According to Mansur, between $20bn and $25bn may have been moved out of the country through banking networks dominated by family interests. He said reforms were urgently needed to prevent decisions driven by individuals rather than institutions.
“We must ensure that individual-centric decisions no longer shape the banking sector,” he said, adding that vigilance at all levels is essential to stop further deterioration.
Despite the challenges, Mansur expressed cautious optimism about asset quality, saying the ratio of non-performing loans could fall to around 25 per cent by March. To help manage failing institutions, he said Bangladesh Bank is working to establish a Bank Resolution Fund of between Tk 30,000 crore and Tk 40,000 crore, which would cover both banks and non-bank financial institutions.
The governor also highlighted the role of digitalisation in strengthening public finances, arguing that a transition towards a cashless economy could significantly reduce tax evasion. He estimated that wider use of digital payments could generate an additional Tk 1.5 lakh crore to Tk 2 lakh crore in annual revenue and stressed the importance of bringing students into the formal banking system at an early stage.
Mansur warned that political interference remains a major risk for the sector unless legal reforms are carried out, including revisions to the Bangladesh Bank Ordinance to strengthen the central bank’s independence.
Others speaking at the event, including Jagannath University Vice-Chancellor Rezaul Karim and Economics Department Chair Sharif Mosharraf Hossain, echoed concerns about weak oversight and called for stricter monitoring and faster recovery of bad loans to restore confidence in Bangladesh’s fragile banking system.
