An International Monetary Fund (IMF) mission has launched a comprehensive review of Bangladesh’s banking sector as it begins discussions on Dhaka’s request for a new $4.5 billion lending programme.
Officials familiar with the process said that the IMF’s assessment will extend far beyond standard macroeconomic indicators and this time, the future of the funding hinges on the credibility of the bank rescue model.
A 12-member IMF delegation commenced its five-day visit on Sunday with meetings at the Bangladesh Bank headquarters. The mission’s schedule reveals that a major portion of the agenda is dedicated to the central bank’s non-standard liquidity support programme –special financial assistance provided outside the conventional central banking framework.
The IMF has requested a detailed, bank-by-bank breakdown of all non-standard lending. The international lender is seeking data on the total assistance, specific facility dates, interest or profit rates, maturity, repayment status, potential rollovers, and whether recipient banks complied with the agreed conditions. It is also scrutinising the enforcement actions taken by Bangladesh Bank when lenders defaulted on these terms.
Bangladesh Bank insiders indicate that the IMF is trying to determine whether these extraordinary measures were implemented under a strict, rules-based framework or relied primarily on ad-hoc administrative decisions. At the heart of the assessment is the unprecedented level of state intervention.
Bangladesh Bank Governor Md Mostaqur Rahman recently confirmed that the central bank provided Tk51,000 crore in liquidity support to distressed banks during the interim government’s tenure. Much of this funding was directed to five Islami banks that were subsequently merged, while National Bank and AB Bank also received substantial aid.
Furthermore, under the current administration, Islami Bank Bangladesh PLC alone has received an additional Tk13,000 crore in special liquidity assistance.
Separately, the government injected Tk20,000 crore into the newly formed Sommilito Islami Bank, using half to repay small depositors and investing the remainder in Sukuk bonds.
The IMF’s scrutiny, however, goes beyond mere figures. The mission has scheduled a dedicated session focusing entirely on the liquidity position of Islami Bank Bangladesh PLC. It will hold detailed talks with the central bank’s Financial Stability Department regarding deposit withdrawal patterns, the behaviour of retail versus institutional depositors, transaction trends, the impact of remittances, how withdrawal restrictions were managed, and the lessons learned from managing the crisis.
Officials believe the IMF intends to use the country’s largest Shariah-based bank as a case study to evaluate Bangladesh’s broader bank rescue strategy.
The scrutiny extends to the legal basis for this special liquidity support, the enforceability of the collateral backing it, and the ultimate allocation of financial losses.
The IMF has asked Bangladesh Bank to clarify the legal status of promissory notes and their position under the Bank Resolution Act. Crucially, the IMF wants to know whether the central bank will receive a government indemnity, or if the financial risks of the rescue programme will remain on its own balance sheet.
Restrictions on deposit withdrawals are also under review. Following the political transition, severe cash shortages prompted phased weekly withdrawal limits.
The IMF is examining how these were implemented, whether different categories of depositors faced varying treatment, and how effectively banks communicated with customers.
Furthermore, the global lender is reviewing legislation passed to restructure weak banks, focusing heavily on the controversial Section 18A of the Bank Resolution Act, which the government has since announced it will repeal.
The IMF aims to assess whether the reform programme will remain durable over time. Consequently, discussions are also covering foreign exchange market interventions, exchange rate management, and quasi-fiscal operations.
Deputy Governor Habibur Rahman said, “Our meeting with the IMF is still at a very preliminary stage. We are listening to them. We will present our position later.”
The IMF delegation will conclude its visit on 16 July before returning to Washington to prepare its assessment report. A positive outcome could clear the path for loan disbursements to begin in January next year.
