The World Bank has approved $450 million in financing to help Bangladesh strengthen its banking sector, as authorities seek to restore confidence in the financial system and support long-term economic growth.
The funding, provided under the Financial Sector Support Project II, is designed to improve the protection of small depositors, strengthen banking supervision and enhance the country’s ability to respond to financial sector risks, according to a statement issued by the World Bank.
The initiative comes at a time when Bangladesh’s banking industry is facing mounting pressure from high levels of non-performing loans, weak governance practices and regulatory challenges.
The World Bank said, "The programme would help establish stronger safeguards across the sector while laying the foundation for broader reforms.”
A key focus of the project is strengthening the deposit protection framework, which is intended to provide greater security for ordinary savers.
The financing will also support the deposit protection fund through additional capital and help advance reforms aimed at improving financial stability.
The programme includes measures to develop an emergency liquidity assistance framework, create strategies for restructuring troubled banks and support reform efforts within state-owned financial institutions.
Bangladesh’s banking sector remains the dominant component of the country’s financial system, accounting for around 90 per cent of total financial sector assets. However, the sector continues to face significant difficulties.
Official figures show that the ratio of non-performing loans reached 32.6 per cent at the end of March 2026, considerably higher than the South Asian regional average of 7.9 per cent.
Meanwhile, the banking system’s capital-to-risk-weighted assets ratio stood at negative 2.6 per cent at the end of December 2025, highlighting ongoing financial vulnerabilities.
Jean Pesme, the World Bank’s Division Director for Bangladesh and Bhutan, said, "A stable and inclusive financial system would be essential if Bangladesh is to achieve its ambition of becoming a trillion-dollar economy.”
He noted that the banking sector is under growing strain and said the project would help introduce critical safeguards, systems and tools needed to protect depositors, strengthen confidence and improve stability across the financial system.
Alongside institutional reforms, the project will modernise Bangladesh Bank’s information and communications technology infrastructure.
The upgrades are expected to help address rising cybersecurity threats, improve data collection and analysis, and strengthen the central bank’s capacity for risk-based supervision.
The World Bank also said, "These improvements would enable regulators to identify emerging risks more effectively and enhance the resilience of the broader financial sector.”
Toshiaki Ono, Senior Financial Sector Specialist at the World Bank and Task Team Leader for the project, said, "The initiative forms part of a wider effort involving international development partners, including the International Monetary Fund and the Asian Development Bank.”
According to Ono, the programme is intended to improve crisis preparedness and strengthen the authorities’ ability to manage potential stress within the banking system, helping create a more stable environment for investment, economic activity and job creation.
The latest financing represents another step in ongoing efforts to reform Bangladesh’s financial sector, with policymakers seeking to address structural weaknesses while improving confidence among depositors, investors and businesses.
