Dhaka, Bangladesh (BBN) - The World Bank’s Board of Executive Directors has approved US$450 million in financing to help Bangladesh strengthen the foundations for a stronger its banking sector for the revival of the economic growth and job creation.
The Financial Sector Support Project II will focus on reinforcing the country's deposit protection system, enhancing Bangladesh Bank (BB)’s supervisory capacity, and laying the groundwork for bank resolution mechanisms and reforms of state-owned banks.
The project will increase the capital of the deposit protection fund while advancing key reform priorities, including improving the deposit protection framework, establishing an effective Emergency Liquidity Assistance (ELA) mechanism, developing bank restructuring strategies, and supporting reforms in state-owned banks, according to a World Bank press statement.
The Washington-based global lender also said that Bangladesh's banking sector continues to face significant challenges stemming from weak corporate governance, regulatory capture, and extensive related-party lending.
The non-performing loan (NPL) ratio stood at 32.6 per cent at the end of March 2026, substantially higher than the South Asian average of 7.9 per cent, while the system-wide capital-to-risk-weighted assets ratio remained negative 2.6 per cent at the end of December 2025.
“Bangladesh’s vision of attaining a trillion-dollar economy requires a stable and inclusive financial sector. But the banking sector—which accounts for about 90 per cent of total financial sector assets—faces mounting stress,” Jean Pesme, World Bank Division Director for Bangladesh and Bhutan said in the statement. “This project will help Bangladesh put in place a set of essential tools, systems, and safeguards needed to protect small depositors and support confidence, restore stability in the banking sector, allowing it to support economic growth and job creation.”
The project will also modernize the BB’s Information and Communications Technology (ICT) infrastructure to address rising cybersecurity risks and bridge critical gaps in sector-wide data and analytics. The upgrades are expected to strengthen the central bank's ability to monitor risks, implement data-driven and risk-based 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 bolster 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 of the project.
BBN/SSR/AD