Bangladesh Association of Banks (BAB) has called for sweeping fiscal, regulatory and legal reforms in the banking sector, warning that weak capital buffers, rising bad loans and governance failures are undermining financial stability ahead of the national budget.
A delegation of BAB leaders met Finance Minister Amir Khosru Mahmud Chowdhury on Tuesday, outlining what it described as “severe structural stress” in the banking industry, including rising non-performing loans, weak private sector credit growth and declining public confidence.
The association said the sector’s overall capital adequacy ratio has fallen to nearly 3 per cent, limiting banks’ ability to support lending, investment and employment generation.
It also pointed to prolonged legal recovery processes and governance lapses as key factors eroding depositors’ trust.
BAB stressed that any recapitalisation strategy must be tied to stronger recovery mechanisms, including decisive action against individuals and groups accused of siphoning funds from banks while retaining shares and assets within the financial system.
It also called for swift legal recovery processes, confiscation of illicitly acquired shares and stronger enforcement measures to restore confidence.
The association raised concerns over provisions under Section 18K of the proposed Banking Resolution framework, warning that any perception of allowing controversial former sponsors or major defaulters to return to the banking system could undermine depositor confidence and reform credibility.
Among its key proposals, BAB recommended reducing corporate tax for banks to 30 per cent to strengthen internal capital generation and support Basel III compliance.
It also called for full tax deductibility of loan-loss provisions for five years and removal of additional taxes on stock dividends to encourage capital retention.
Other recommendations included fast-track approval of rights shares and recapitalisation plans, continued access to SME refinance, green financing and long-term financing facilities under approved recovery programmes, and stronger coordination between Bangladesh Bank and the securities regulator to support capital raising and asset recovery.
BAB further proposed establishing fast-track financial courts and a centralised asset management company to handle distressed assets, along with amendments to governance provisions under the Bank Company Act to narrow the definition of family ownership structures.
The delegation also urged expansion of digital interoperability and wider adoption of Bangla QR to support a cashless financial ecosystem.
BAB leaders said they remain committed to supporting the government’s reform agenda and working with regulators to restore confidence, strengthen governance and stabilise the banking sector.
The meeting was attended by BAB Chairman Abdul Hai Sarker, Vice Chairmen Romo Rouf Chowdhury, Sharif Zahir, Monzurur Rahman and Rashed Ahmed Chowdhury, along with chairmen and senior representatives of several private commercial banks.
