TDS Desk:

World Bank (WB) and Asian Development Bank (ADB) will finance Bangladesh’s banking reforms. For this, the two institutions will pay $1.75 billion or $175 crore. Of this, ADB will provide $130 crore in three phases while the WB will give $40-$45 crore.

Besides bank reform, this loan will be spent on the modernization and capacity building of Bangladesh Bank (BB). In this regard, the central bank is undertaking a new project. Loan assistance may also come from the International Monetary Fund (IMF), informed BB.

Central bank sources state that talks have started on a loan of $40 crore from the WB, however, in the current situation, discussions are going on to increase the loan amount to $45 crore. ADB has shown interest in lending $130 crores for banking reform. The central bank has also started discussions on whether this loan can be given to weak banks as a recapitalization or not.

The banking system of the country became fragile during the regime of Sheikh Hasina. At least 10 banks are in critical condition. After the fall of the government, the Interim Government emphasized banking reform.

Economist Ahsan H. Mansur, who took over as the new governor of Bangladesh Bank, reconstituted the board of directors of 10 banks and one financial institution. Out of which, 9 were controlled by top industrial conglomerate S Alam Group. The group has embezzled about Tk 2 lakh crore from these banks anonymously! The new board is worried about recovering this huge amount of debt. In this situation, these banks are in a liquidity crisis.

Instead of setting up a commission on banking reforms, the government is planning to quickly set up three task forces. It will take a long time to form the commission, that’s why, BB wants to start the reforms soon through the task force – so that the task forces can play their proper role, the highest technical knowledge and assistance from home and abroad can be taken.

The WB can provide $40 crores for banking reform, with an interest rate of 6 to 6.50 percent. Discussions are underway on getting a $130 crore loan from ADB at the same interest rate. In three tranches, ADB can provide $50 crore in the first year, $50 crore in the second year, and $30 crore in the third year.