The World Bank has approved a US$450 million financing package to strengthen Bangladesh’s fragile banking sector, protect millions of small depositors and support far-reaching financial sector reforms aimed at restoring confidence, stability and economic growth.
The funding, approved by the World Bank’s Board of Executive Directors on Wednesday under the Financial Sector Support Project II, comes at a critical juncture as Bangladesh grapples with mounting stress in its banking industry, rising non-performing loans and weak institutional governance.
The project is designed to reinforce the country’s deposit protection framework, enhance Bangladesh Bank’s supervisory capabilities and establish the foundations for bank resolution mechanisms and state-owned bank reforms.
A significant portion of the funding will be used to strengthen the Deposit Protection Fund by increasing its capital base, ensuring greater security for small savers.
The programme will also support key reform initiatives, including improvements to the deposit insurance system, the creation of an effective Emergency Liquidity Assistance framework, the development of bank restructuring strategies and the implementation of reforms in state-owned banks.
Bangladesh’s banking sector continues to face deep-rooted challenges stemming from weak corporate governance, regulatory capture and extensive related-party lending. According to the latest data, the non-performing loan (NPL) ratio surged to 32.6 per cent at the end of March 2026"more than four times the South Asian average of 7.9 per cent.
Meanwhile, the sector’s capital-to-risk-weighted assets ratio remained in negative territory at minus 2.6 per cent as of December 2025, highlighting the severity of financial vulnerabilities.
“Bangladesh’s vision of becoming a trillion-dollar economy requires a stable and inclusive financial sector. However, the banking sector"which accounts for around 90 per cent of total financial sector assets"is under increasing strain,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.
“This project will help Bangladesh establish essential tools, systems and safeguards needed to protect small depositors, restore confidence and strengthen financial stability, enabling the banking sector to better support economic growth and job creation,” he added.
The initiative will also modernise Bangladesh Bank’s Information and Communications Technology (ICT) infrastructure, helping address growing cybersecurity threats and closing critical gaps in financial sector data and analytics.
Officials said the upgraded systems would enhance the central bank’s capacity for risk monitoring, data-driven supervision and early detection of vulnerabilities, thereby improving the overall resilience of the financial system.
“The project forms part of a coordinated reform agenda supported by development partners, including the IMF and the Asian Development Bank,” said Toshiaki Ono, Senior Financial Sector Specialist at the World Bank and Task Team Leader for the project.
