The country’s bank owners have backed the government’s ambitious banking-sector rescue programme, while calling for the recovery of looted assets, stricter action against wilful defaulters and safeguards to prevent those responsible for bank failures from returning to the financial system.
In a detailed reaction to the proposed FY2026-27 budget, the Bangladesh Association of Banks (BAB), the body representing private bank sponsors and chairmen, welcomed the government’s decision to allocate around Tk40,000 crore (36,706 crore) for the recapitalisation of weak banks, describing it as a major step towards restoring stability and confidence in the financial sector.
However, the association cautioned that recapitalisation alone would not deliver lasting results unless it was accompanied by aggressive efforts to recover misappropriated assets and hold those responsible accountable.
“Recovery must accompany recapitalisation,” BAB said in a statement issued on Sunday.
“Public funds committed to restoring weak banks will achieve lasting results only when matched by swift legal recovery of misappropriated assets, decisive enforcement against wilful defaulters and transparent treatment of shareholdings acquired through irregular means.”
The statement comes as the government pursues a broad restructuring programme involving bank mergers, recapitalisation, governance reforms and tighter regulatory oversight after years of financial deterioration in parts of the banking sector.
BAB described the budget as a “budget of ambition and direction” and welcomed a series of measures aimed at strengthening banks and reviving investment.
Among the initiatives praised by the association were the recapitalisation programme for weak banks, the introduction of risk-based supervision aligned with international standards, commitments to curb political interference in banking, and plans to develop corporate and municipal bond markets.
The association also welcomed the increase in the excise-duty exemption threshold on deposits to Tk400,000, the rationalisation of excise duty on loan facilities, the Tk60,000 crore stimulus package for distressed businesses and the government’s broader deregulation agenda aimed at reducing the cost of doing business.
BAB further supported the government’s decision to rely more heavily on external financing to fund the budget deficit, arguing that it would help reduce pressure on domestic liquidity.
At the same time, the organisation highlighted several areas of concern.
One of its strongest warnings related to government borrowing from the banking system.
BAB said the planned borrowing of Tk112,000 crore from banks could crowd out private-sector credit at a time when business lending growth remains near historic lows.
“The Association urges disciplined adherence to the external financing plan and early development of the bond market as a genuine alternative,” the statement said.
The organisation also called for the establishment of a dedicated Asset Management Company (AMC) to help clean up the balance sheets of weak banks, reduce non-performing loans and address capital shortfalls across the sector.
BAB argued that the proposed bank resolution framework should include safeguards preventing individuals whose actions contributed to the distress of financial institutions from re-entering the banking system.
The association also raised concerns over tax policy.
While supporting efforts to expand the tax net and integrate tax and banking databases, it urged the government to implement the measures gradually so that financial inclusion among small and rural depositors is not undermined.
BAB further called for a review of the banking sector’s 37.5 percent corporate tax rate and urged temporary tax relief for weak banks to help them rebuild capital and meet provisioning requirements.
The organisation also warned that taxing dividend income from stock-market investments could discourage institutional investment and undermine efforts to deepen the capital market.
In addition, it urged the government to exempt software, hardware and digital infrastructure used by banks from duties and taxes, arguing that the transition to a digital and cashless economy would require substantial investment in technology.
In its concluding remarks, BAB said the budget correctly recognised the central role of the banking sector in economic recovery but stressed that implementation and accountability would determine whether the reform agenda succeeds.
“There can be no strong economy without strong banks, and no strong banks without trust,” the statement said.
“The wealth looted from the banking sector must be traced, recovered and returned to depositors through due process of law.”
The statement was signed by BAB Chairman Abdul Hai Sarker.
