TDS Desk:

The World Bank project will also modernise Bangladesh Bank’s information and communications technology infrastructure.

The World Bank’s has approved US$450 million in financing to help Bangladesh strengthen the foundations of its banking sector, a key prerequisite for reviving economic growth and creating jobs.

The Financial Sector Support Project II aims to strengthen the deposit protection system to safeguard small depositors and enhance Bangladesh Bank’s supervisory capacity and systems.

The project will also lay the groundwork for bank resolution and reforms in state-owned banks, the WB said in a press release on Wednesday.

It will support the deposit protection fund by increasing its capital and advancing key reform priorities, including improving the deposit protection system, establishing an effective Emergency Liquidity Assistance framework, developing bank restructuring strategies and supporting reforms in state-owned banks.

The World Bank said Bangladesh’s banking sector faces significant challenges stemming from weak corporate governance, regulatory capture and related-party lending. The non-performing loan (NPL) ratio stood at 32.6% at the end of March 2026, far above the South Asian average of 7.9%, while the system-wide capital-to-risk-weighted assets ratio was negative 2.6% at the end of December 2025.

“Bangladesh’s vision of becoming a trillion-dollar economy requires a stable and inclusive financial sector. But the banking sector—which accounts for about 90% of total financial sector assets—faces mounting stress,” said Jean Pesme, World Bank division director for Bangladesh and Bhutan.

“This project will help Bangladesh put in place essential tools, systems and safeguards needed to protect small depositors, restore confidence and stability in the banking sector, and support economic growth and job creation,” he added.

The project will also modernise Bangladesh Bank’s information and communications technology infrastructure, helping address growing cybersecurity risks and close critical gaps in sector-wide data and analytics.

According to the World Bank, the improvements will strengthen Bangladesh Bank’s ability to monitor risks, enhance data-driven and risk-based supervision and improve the resilience of the financial sector.

“The project, which forms part of a coordinated approach by development partners including the IMF and the Asian Development Bank, supports measures to bolster crisis preparedness and strengthen the authorities’ capacity to manage banking sector stress,” said Toshiaki Ono, World Bank senior financial sector specialist and task team leader for the project.