Bangladesh Bank's far-reaching reforms under the interim government — from revealing the actual extent of defaulted loans to stabilising the foreign exchange market and tightening monetary discipline — signal a clear turning point for the banking sector and are set to influence its future governance.

As part of this overhaul, the central bank has formulated at least six key legislative drafts aimed at dismantling the culture of impunity that allowed influential families and political figures to hollow out the financial system over the last two decades.

Central to this mission are proposed amendments to the Bank Company Act and the Bangladesh Bank Order, which seek to curb the dominance of business conglomerates and establish the central bank's autonomy.

Grip of death

The proposed draft of the Bank Company Act introduces stringent limits on board representation to prevent a repeat of the systemic collapses seen during the Sheikh Hasina regime.

Under the new rules, the number of directors from a single family and its affiliates on a bank board will be slashed from five to two. Furthermore, a director's continuous term will be halved from twelve years to six.

These measures are a direct response to the "family dominance" of ousted prime minister Sheikh Hasina and her cohorts which crippled the sector, most notably by conglomerates like the S Alam Group.

Such entities allegedly gained control of multiple banks to siphon off thousands of crores of taka, much of which was reportedly laundered abroad.

To further ensure professional management, the central bank also proposes barring political figures from bank boards and restricting any single individual from holding significant stakes in multiple banks.

Reduce state control

In a bid to shield the regulator from political interference, the draft amendment to the Bangladesh Bank Ordinance 2025 proposes significant changes to key appointments.

Under the new mandate, the president will appoint the governor and deputy governors, and the governor's post will be upgraded from the status of a secretary to that of a minister.

The amendment also seeks to reduce state control over the central bank's board. While the current board includes three government representatives, the final draft proposes retaining only one, ensuring that the institution can make financial decisions based on economic necessity rather than political convenience.

Safety and debt recovery

Beyond structural governance, BB has already moved to implement the Bank Resolution Ordinance and the Deposit Protection Act. These laws have already facilitated the merger of five weak banks while raising the insurance coverage ceiling to protect small depositors.

To address the mountain of bad loans or non-performing loans, the central bank has introduced the Distressed Asset Management Ordinance and proposed updates to the Money Loan Court.

These reforms aim to treat general and "wilful" defaulters with equal severity and speed up the settlement of long-pending recovery cases.

Despite the central bank board's approval and pressure from the International Monetary Fund (IMF) to expedite these changes, the government has reportedly been responding slowly to the final review of the Bank Company Act and the Bangladesh Bank Order.

Bangladesh Bank sources indicate that the swift implementation of these laws is essential to restoring public trust and ensuring that the recent stabilisation of the foreign exchange market also translates into long-term financial health.

Bangladesh Bank's sweeping reform measures under the interim government – ranging from exposing the true scale of default loans to stabilising the foreign exchange market and enforcing monetary discipline – have marked a decisive turning point for the country's banking sector and are expected to shape its future governance.

These measures have restored depositor confidence, increased liquidity and contributed to a steady decline in inflation. Although inflation did not come down to the expected level, its further rise has been checked. However, little progress has been made in the repatriation of assets siphoned off from Bangladesh.

Under the reform programme, the Bangladesh Bank identified default loans of Tk6.44 lakh crore as of September, which was 36% of total loans, three times higher than the amount shown during the previous regime.

The huge default loans that were assessed through asset quality review by engaging foreign firms under the reform programme helped the central bank to go for proper treatment for weak banks.

In a landmark move, the Bangladesh Bank merged five Islamic banks – each burdened with default loan ratios exceeding 90% – to form a new entity, Sammilito Islami Bank.

Bangladesh Bank board also decided to liquidate another nine non-bank financial institutions, which are currently not in a position to continue to operate due to high default loans.

The total estimation for merger and liquidation is Tk70,000 crore, of which will be provided from the taxpayers' money to mitigate the hole created by massive corruption during the ousted prime minister Sheikh Hasina's 15-year regime.

Speaking at a recent event, Bangladesh Bank Governor Ahsan H Mansur said, "We have already started addressing the issues of five weak banks and provided Tk35,000 crore. But several others remain at risk. Resolving their problems will require another Tk35,000 crore, bringing the total cost to around Tk70,000 crore."

He said this massive amount cannot be mobilised overnight. "We are considering allocations over multiple fiscal years. It will have to be a phased recovery, not a one-time fix."

The governor said the Bangladesh Bank is taking steps to liquidate nine NBFIs, and four to five more NBFIs could face liquidation if they fail to restructure or raise fresh capital.

"Those which can prove viability will be given a chance to survive. We're not promising miracles. But with time, transparency, and the rule of law, we can rebuild trust in the financial system."

Mansur also acknowledged that the default loan situation is more serious than previously disclosed. The reported NPL figure had been hovering around 9% in the past. It is 36% now. "We are not going to manipulate the data. The public deserves transparency."

The governor said the central bank aims to bring down the NPL rate to 10% by March 2026. "It might take 10 years to reduce it to 4-5%, but that is the sustainable path."

What amendment in major laws

The Bangladesh Bank also formulated at least six laws, including amending the Bank Company Act to bring corporate governance in the board of banks, the Bangladesh Bank Order to ensure central bank autonomy, introduced Bank Resolution Act for effective resolution and Deposit Protection Act raising insurance coverage ceiling for depositors, Distressed Asset Management Ordinance for tackling default loans and Money loan court to speed up case settlement.

Out of six, two major laws, including the Bank Company Act and the Bangladesh Bank Order, are still under government review after the approval from the board of Bangladesh Bank.

Although the International Monetary Fund (IMF) has been pursuing Bangladesh Bank to implement the amendment of both laws, the government has been responding slowly, according to central bank sources.

In the final draft amendment to the Bank Company Act, the Bangladesh Bank focused on limiting the power of influential individuals and families and political figures.

The proposed draft limits the number of directors from a single family and their affiliates on bank boards from five to two, and cuts a director's continuous term from 12 years to six, in a move to curb family influence in bank management.

Such dominance by certain board members has crippled the country's banking sector over the past 15-20 years, particularly during the Sheikh Hasina regime, leading to rampant loan scams, rising non-performing loans, and loss of public funds and trust.

Conglomerates such as S Alam Group gained control of multiple banks and allegedly withdrew thousands of crores of taka, much of which was, ultimately, allegedly laundered out of the country.

The central bank also proposes to bar political figures from boards, ease foreign investors' shareholding limits, restrict one person from holding large stakes in multiple banks, and treat general and wilful defaulters equally.

The draft amendment to the Bangladesh Bank Ordinance 2025 introduces major changes in key appointments, mandate, and financial management to shield the central bank from political influence to ensure autonomy.

Under the draft, the president will appoint the governor and deputy governors. While the amendment initially removed government representatives from the board, the final version retained one, according to the draft approved by the board. At present, the board includes three government representatives.

The governor's post will be upgraded from secretary to ministerial status under the draft amendment.

The Bangladesh Bank already implemented the Bank Resolution Ordinance and Deposit Protection Act through merging five banks under the amended ordinance.

Reformation in forex market

The Bangladesh Bank also reformed forex market management by introducing a greater flexible exchange rate mechanism, which helped to bring stability in the currency market.

Foreign exchange reserves rebounded strongly after the interim government cleared external arrears. The Bangladesh Bank added over $8 billion to reserves within a year, raising the total from $18.8 billion in December 2024 to $26.8 billion as of 4 December 2025, enough to cover more than four months of imports.

A more flexible exchange rate regime, coupled with aggressive policy rate hikes, restored discipline to the currency market. The taka has held steady at Tk122-123 per dollar for six consecutive months. The central bank also stopped money printing and moved swiftly to merge and restructure troubled banks, calming depositors and bringing back liquidity. Deposits increased noticeably after governance reforms at problematic banks.

These measures helped inflation fall from a 12-year high of 11.36% in July 2024 to single digits for the past six months. Food inflation, once at 14%, dropped to 7.36% in November. Although still above the Bangladesh Bank's FY26 target of 6.5%, the government's Bangladesh State of the Economy 2025 attributes the improvement to monetary tightening, supply-side interventions, stable global commodity prices, and a steady exchange rate.

Development of asset recovery

Although the Bangladesh Bank formed a task force for supporting the identification, investigation, and repatriation of assets siphoned off from Bangladesh, little progress has been made in this regard due to the complex process.

Its key functions include removing legal barriers to expedite proceedings, managing recovered assets, coordinating with international partners for information sharing, and strengthening institutional capacity and internal coordination to ensure effective asset recovery.

According to monetary policy statement of Bangladesh Bank for first half of FY26, the BFIU (Bangladesh Financial Intelligence Unit) has formed Joint Investigation Teams (JITs), led by the Anti-Corruption Commission (ACC), with participation from the Criminal Investigation Department (CID), the Central Intelligence Cell (CIC), and the Customs Intelligence and Investigation Directorate (CIID). These teams have prioritised 11 nationally significant money laundering cases and are actively investigating them.

How Islami Bank was quietly taken over

So far, assets both within Bangladesh and abroad linked to the accused have been identified and attached. Additionally, BFIU has frozen over 6,500 suspicious accounts and shared more than 100 financial intelligence reports with relevant law enforcement agencies. The Task Force is also collaborating with several international law and litigation firms on other money laundering cases beyond the prioritized 11 cases, and is seeking to appoint legal representatives in various jurisdictions to overcome legal barriers to asset recovery.

The Task Force maintains close coordination with international organizations, including the Stolen Asset Recovery (StAR) Initiative, the US Department of Justice (USDOJ), the International Anti-Corruption Coordination Centre (IACCC), and the International Centre for Asset Recovery (ICAR), to access technical support, legal expertise, and training. To promote cross-border cooperation, the government is also working to sign Mutual Legal Assistance Treaties (MLATs) with several countries.

Bangladesh Bank's sweeping reform measures under the interim government – ranging from exposing the true scale of default loans to stabilising the foreign exchange market and enforcing monetary discipline – have marked a decisive turning point for the country's banking sector and are expected to shape its future governance.

These measures have restored depositor confidence, increased liquidity and contributed to a steady decline in inflation. Although inflation did not come down to the expected level, its further rise has been checked. However, little progress has been made in the repatriation of assets siphoned off from Bangladesh.

Under the reform programme, the Bangladesh Bank identified default loans of Tk6.44 lakh crore as of September, which was 36% of total loans, three times higher than the amount shown during the previous regime.

The huge default loans that were assessed through asset quality review by engaging foreign firms under the reform programme helped the central bank to go for proper treatment for weak banks.

In a landmark move, the Bangladesh Bank merged five Islamic banks – each burdened with default loan ratios exceeding 90% – to form a new entity, Sammilito Islami Bank.

Bangladesh Bank board also decided to liquidate another nine non-bank financial institutions, which are currently not in a position to continue to operate due to high default loans.

The total estimation for merger and liquidation is Tk70,000 crore, of which will be provided from the taxpayers' money to mitigate the hole created by massive corruption during the ousted prime minister Sheikh Hasina's 15-year regime.

Speaking at a recent event, Bangladesh Bank Governor Ahsan H Mansur said, "We have already started addressing the issues of five weak banks and provided Tk35,000 crore. But several others remain at risk. Resolving their problems will require another Tk35,000 crore, bringing the total cost to around Tk70,000 crore."

He said this massive amount cannot be mobilised overnight. "We are considering allocations over multiple fiscal years. It will have to be a phased recovery, not a one-time fix."

The governor said the Bangladesh Bank is taking steps to liquidate nine NBFIs, and four to five more NBFIs could face liquidation if they fail to restructure or raise fresh capital.

"Those which can prove viability will be given a chance to survive. We're not promising miracles. But with time, transparency, and the rule of law, we can rebuild trust in the financial system."

Mansur also acknowledged that the default loan situation is more serious than previously disclosed. The reported NPL figure had been hovering around 9% in the past. It is 36% now. "We are not going to manipulate the data. The public deserves transparency."

The governor said the central bank aims to bring down the NPL rate to 10% by March 2026. "It might take 10 years to reduce it to 4-5%, but that is the sustainable path."

What amendment in major laws

The Bangladesh Bank also formulated at least six laws, including amending the Bank Company Act to bring corporate governance in the board of banks, the Bangladesh Bank Order to ensure central bank autonomy, introduced Bank Resolution Act for effective resolution and Deposit Protection Act raising insurance coverage ceiling for depositors, Distressed Asset Management Ordinance for tackling default loans and Money loan court to speed up case settlement.

Out of six, two major laws, including the Bank Company Act and the Bangladesh Bank Order, are still under government review after the approval from the board of Bangladesh Bank.

Although the International Monetary Fund (IMF) has been pursuing Bangladesh Bank to implement the amendment of both laws, the government has been responding slowly, according to central bank sources.

In the final draft amendment to the Bank Company Act, the Bangladesh Bank focused on limiting the power of influential individuals and families and political figures.

The proposed draft limits the number of directors from a single family and their affiliates on bank boards from five to two, and cuts a director's continuous term from 12 years to six, in a move to curb family influence in bank management.

Such dominance by certain board members has crippled the country's banking sector over the past 15-20 years, particularly during the Sheikh Hasina regime, leading to rampant loan scams, rising non-performing loans, and loss of public funds and trust.

Conglomerates such as S Alam Group gained control of multiple banks and allegedly withdrew thousands of crores of taka, much of which was, ultimately, allegedly laundered out of the country.

The central bank also proposes to bar political figures from boards, ease foreign investors' shareholding limits, restrict one person from holding large stakes in multiple banks, and treat general and wilful defaulters equally.

The draft amendment to the Bangladesh Bank Ordinance 2025 introduces major changes in key appointments, mandate, and financial management to shield the central bank from political influence to ensure autonomy.

Under the draft, the president will appoint the governor and deputy governors. While the amendment initially removed government representatives from the board, the final version retained one, according to the draft approved by the board. At present, the board includes three government representatives.

The governor's post will be upgraded from secretary to ministerial status under the draft amendment.

The Bangladesh Bank already implemented the Bank Resolution Ordinance and Deposit Protection Act through merging five banks under the amended ordinance.

Reformation in forex market

The Bangladesh Bank also reformed forex market management by introducing a greater flexible exchange rate mechanism, which helped to bring stability in the currency market.

Foreign exchange reserves rebounded strongly after the interim government cleared external arrears. The Bangladesh Bank added over $8 billion to reserves within a year, raising the total from $18.8 billion in December 2024 to $26.8 billion as of 4 December 2025, enough to cover more than four months of imports.

A more flexible exchange rate regime, coupled with aggressive policy rate hikes, restored discipline to the currency market. The taka has held steady at Tk122-123 per dollar for six consecutive months. The central bank also stopped money printing and moved swiftly to merge and restructure troubled banks, calming depositors and bringing back liquidity. Deposits increased noticeably after governance reforms at problematic banks.

These measures helped inflation fall from a 12-year high of 11.36% in July 2024 to single digits for the past six months. Food inflation, once at 14%, dropped to 7.36% in November. Although still above the Bangladesh Bank's FY26 target of 6.5%, the government's Bangladesh State of the Economy 2025 attributes the improvement to monetary tightening, supply-side interventions, stable global commodity prices, and a steady exchange rate.

Development of asset recovery

Although the Bangladesh Bank formed a task force for supporting the identification, investigation, and repatriation of assets siphoned off from Bangladesh, little progress has been made in this regard due to the complex process.

Its key functions include removing legal barriers to expedite proceedings, managing recovered assets, coordinating with international partners for information sharing, and strengthening institutional capacity and internal coordination to ensure effective asset recovery.

According to monetary policy statement of Bangladesh Bank for first half of FY26, the BFIU (Bangladesh Financial Intelligence Unit) has formed Joint Investigation Teams (JITs), led by the Anti-Corruption Commission (ACC), with participation from the Criminal Investigation Department (CID), the Central Intelligence Cell (CIC), and the Customs Intelligence and Investigation Directorate (CIID). These teams have prioritised 11 nationally significant money laundering cases and are actively investigating them.

How Islami Bank was quietly taken over

So far, assets both within Bangladesh and abroad linked to the accused have been identified and attached. Additionally, BFIU has frozen over 6,500 suspicious accounts and shared more than 100 financial intelligence reports with relevant law enforcement agencies. The Task Force is also collaborating with several international law and litigation firms on other money laundering cases beyond the prioritized 11 cases, and is seeking to appoint legal representatives in various jurisdictions to overcome legal barriers to asset recovery.

The Task Force maintains close coordination with international organizations, including the Stolen Asset Recovery (StAR) Initiative, the US Department of Justice (USDOJ), the International Anti-Corruption Coordination Centre (IACCC), and the International Centre for Asset Recovery (ICAR), to access technical support, legal expertise, and training. To promote cross-border cooperation, the government is also working to sign Mutual Legal Assistance Treaties (MLATs) with several countries.

Bangladesh's financial system entered 2025 with fewer places left to hide. Years of weak loan discipline, repeated rescheduling, and regulatory forbearance had accumulated into visible stress across banks, especially those with governance and connected-lending problems. What followed was not a dramatic break, but a coordinated attempt to clean up balance sheets, install guardrails, and manage adjustment without panic.

The reform story of 2025 is therefore not about a single law or intervention. It is about sequencing: diagnose first, build tools for failure, protect depositors, tighten prudential rules – and only then confront the harder political questions about discretion, accountability, and central-bank power.

Uncovering the reality

Bangladesh Bank announced in 2024-25 that it would conduct independent Asset Quality Reviews of 17 banks – prioritising weak and Islamic banks – to establish a credible baseline of losses, capitalisation needs, and governance failures. AQRs would be conducted using best practice methodologies and external expertise.

A first group of six private banks AQRs was completed by mid-2025, with the remainder scheduled by year-end. The AQR results were shared with bank boards, confirming substantial under-recognition of non-performing assets and capital shortfalls. A second phase covering three additional banks was initiated, but the broader program stalled – effectively leaving the system with partial diagnosis and no system-wide reckoning.

AQRs are resource-intensive for both supervisors and banks. Conducting AQRs for all 17 banks in parallel would have strained BB's supervisory capacity and the availability of qualified external audit firms. The AQR program has crossed a point of no return – but not a point of no delay. Bangladesh has demonstrated that it can run credible diagnostics and act on some of them. Whether it completes the journey depends less on technical capacity than on political willingness to absorb the consequences of what the remaining AQRs are likely to show.

Resolving zombies and maintaining confidence

Bangladesh had long avoided: what happens when banks are not viable?

The Bank Resolution Ordinance filled a long-standing legal gap. It provided formal tools to intervene in failing banks through bridge institutions, purchase-and-assumption transactions, asset separation, bail-ins, bail-outs and – if necessary – temporary public ownership. A dedicated restructuring and resolution unit was set up to operationalise these powers.

This was about ending the default option of indefinite support. For the first time, the system was being designed to absorb bank failure without improvisation.

Resolution tools are politically fragile without depositor confidence. That constraint was addressed through the Deposit Protection Ordinance.

The reform doubled deposit coverage to Tk2,00,000 per depositor and cut payout timelines from months to just over two weeks. Separate protection funds were established for banks and finance companies, with clearer premium rules and membership obligations.

First results on the ground

The most visible application of this new framework was the consolidation of five troubled Islamic banks into a single institution under closer supervision. Rather than allowing multiple weak entities to drift independently – or triggering abrupt closures – authorities opted for aggregation. It is not a textbook resolution, but it marked a break from open-ended forbearance and signaled that Islamic banks would not be exempt from prudential discipline.

The consolidation was operationalised through a BB circular issued on December 30, which set out the legal and supervisory basis for transferring the operations of the five banks into the newly created Sommilito Islami Bank. The circular clarified the continuity of deposits and contracts, placed the new institution under enhanced regulatory oversight, and provided for liquidity support to ensure uninterrupted banking services.

From January 1, small individual depositors were able to access their funds through the new entity. Early results suggest the immediate objective was achieved: depositor panic was contained, payment services continued, and the authorities have gained time to address governance and capital issues within a single supervised platform.

Regulatory progress and regress

Alongside legal reform came quieter changes that matter just as much. Updated definitions of non-performing loans and forbearance reduced the scope for repeated cosmetic rescheduling. Cure-period requirements were tightened, and the transition path toward IFRS 9 – expected-credit-loss provisioning by 2027 – was reaffirmed. Once losses must be recognised earlier and provisioning becomes unavoidable, banks are forced toward recapitalisation, restructuring, or exit.

Rescheduling policy, however, moved in the opposite direction. While tighter classification rules constrained cosmetic rollovers, BB simultaneously revised rescheduling frameworks – especially for large loans. The rescheduling framework itself offered structured relief rather than blanket forbearance. It allows extended repayment tenors, grace periods on principal, and phased instalment schedules for stressed but operating borrowers, subject to documentation of cash flows and viability.

In effect, the framework created a formal channel to stretch repayment timelines while keeping loans within the banking system, delaying classification or resolution but avoiding abrupt defaults. Routing large loan rescheduling through a BB constituted committee reduced unilateral evergreening by weak banks, but it also created focal points for lobbying and rent-seeking. Credit outcomes shifted from bank–customer relationships to regulatory mediation, weakening the link between lending decisions and consequences. Discipline advanced – but cautiously, and unevenly.

The unfinished agenda

Reform intensity outside banking was more measured. The Bangladesh Securities and Exchange Commission focused on surveillance, disclosure, and market infrastructure rather than sweeping legislative change. Insurance reform under the Insurance Development and Regulatory Authority continued incrementally. Bankrupt non-bank financial institutions were dealt with through tighter supervision and restrictions on activity, aimed at containing risk rather than rapid turnaround.

Proposals to amend the Bangladesh Bank Order – aimed at strengthening independence, clarifying accountability, and aligning governance with international norms – remain unresolved. The bureaucracy has effectively played a kick-the-can game by protracting hard decisions about BB autonomy and oversight. At the same time, BB has continued to roll out risk-based supervision frameworks, sharpening off-site monitoring and prioritising supervisory attention toward weaker institutions, even as the legal foundations for its independence remain unsettled.

The uneven pace of reform reflects political triage: banking, as the core source of systemic risk and fiscal exposure, drew the heaviest attention. The deeper story of 2025 is not technocratic triumph or failure, but managed transition. Losses were surfaced, tools were built, and authority was reorganised – while discretion was carefully preserved. Whether this moment becomes a bridge to durable discipline, or hardens into a new equilibrium of managed delay, will turn on one unresolved question: whether reform of BB itself is finally confronted, rather than endlessly postponed.

Zahid Hussain is former lead economist at World Bank Dhaka office

The Indian textile and garment industry is deeply concerned over US President Donald Trump's warning of imposing a 500% tariff on imports from countries that purchase Russian oil. The announcement has already unsettled markets, with shares of Indian exporters falling sharply in Thursday's (8 January) trading.

If implemented, the proposed tariff would be added to the existing 50% import duty imposed last year, significantly increasing the cost burden on Indian goods entering the US, with exporters fearing such a move could severely disrupt trade flows.

Apprehension is particularly visible in Tiruppur, Tamil Nadu, the country's largest knitwear cluster, which contributes nearly 90% of India's knitwear exports.

Ajay Srivastava, founder of the Global Trade Research Initiative, warned that a 500% duty—along with possible secondary restrictions on services—could virtually shut down India's $120 billion annual exports to the US, its largest overseas market.

Vijay Agarwal, chairman of the Cotton Textiles Export Promotion Council, noted that overseas buyers who had earlier planned to shift sourcing to India are now reconsidering due to uncertainty surrounding Trump's threat. Since August last year, the existing 50% US tariff has already forced Indian exporters to cut prices, seek alternative markets, and reroute shipments through neighbouring countries.

The US currently accounts for nearly 30% of India's garment exports. During Fiscal Year 2024–25, India exported apparel and textiles worth $37 billion. Industry data shows apparel exports rose marginally, while textile shipments declined in the April–November period.

Rajat Jaipuria, managing director of Rajalaxmi Cotton Mills, cautioned that a 500% tariff would effectively function as an embargo, with severe consequences for the sector.

India's rice exports jumped 19.4% last year to the second-highest on record after New Delhi lifted all export curbs, making shipments more competitive, government and industry officials told Reuters today (10 January).

An improved flow of rice from the world's largest exporter of the grain curbed shipments from rivals Thailand and Vietnam and drove prices in Asia to their lowest in nearly a decade, easing costs for poor consumers in Africa and other regions.

"Indian shipments rebounded quickly after the government lifted export restrictions" in March, said a government official, who asked not to be named as he was not authorised to speak to the media.

As supplies improved with record production, India removed the last of the export imposed in 2022 and 2023.

Exports rose to 21.55 million metric tons from 18.05 million in 2024, near the 2022 record of 22.3 million tons, the official said.

Non-basmati rice shipments jumped 25% to 15.15 million tons, while basmati exports increased 8% to a record 6.4 million tons, he said.

Non-basmati rice shipments rose sharply to Bangladesh, Benin, Cameroon, Ivory Coast and Djibouti, while Iran, the United Arab Emirates and Britain increased purchases of premium basmati rice during the year, said another government official.

India usually exports more rice than the combined shipments of the world's next three largest exporters: Thailand, Vietnam and Pakistan.

"Indian rice is very competitive compared with supplies from other exporting countries, with lower prices helping India regain lost market share," Nitin Gupta, senior vice president at Olam Agri India, said on the sidelines of the India International Rice Summit.

Bangladesh Bank Governor Ahsan Mansur has issued a stern warning that the "culture of looting" within the nation's banking sector will never be allowed to return.

He emphasised that achieving a transparent financial system requires the essential cooperation of all stakeholders.

The governor made the remarks while speaking as the chief guest in the closing session of the International Islamic Finance and Banking Conference held at the Nawab Nawab Ali Chowdhury Senate Bhaban in the University of Dhaka, on Saturday (10 January).

Mansur noted that Islamic, or Shariah-based banks have historically been competitive, offering attractive profits to depositors.

However, he pointed out that significant sums were looted from this sector due to a failure to ensure corporate governance by specific individuals and institutions - a pointed reference to the unprecedented assault on the banking sector by the ousted Awami League regime's cronies, most notably the S. Alam Group, which secretly took control of at least six banks. All of them were Shariah-based.

Despite these challenges, the Governor highlighted that public trust in Islamic banking remains intact. This was amply demonstrated by the fact that these banks received the highest volume of deposits over the past year.

Specifically, Islami Bank Bangladesh has already begun returning the liquidity support funds it previously received from the central bank.

To prevent future financial crimes and ensure transparency in loan disbursement, the governor announced that Bangladesh Bank has implemented strict control measures.

"A new Islamic Banking Act is currently being drafted to provide a more robust legal framework for the sector," Mansur revealed.

He also called upon Shariah Boards to play a more proactive and courageous role. He urged board members to act independently and without fear of losing their positions, emphasising that their oversight is crucial for the sector's integrity.

Addressing the 'Sukuk' (Islamic bond) market, the governor admitted that the forced sale of the Beximco Sukuk Bond had damaged the market's reputation and eroded investor confidence.

However, the governor noted that the government has been requested to issue new Islamic Sukuk bonds, and preliminary work on this has already commenced.

Concluding his speech, Mansur reiterated that "financial autocracy" has no place in Bangladesh's future.

He stressed that while the central bank is taking the lead, the support of academicians, professionals, and the general public is vital to building a world-class Islamic banking sector defined by governance and accountability.

Academics, researchers, and Islamic Banking experts attended the event.

Bangladesh's ready-made garment exports to the United States fell by nearly 11% year-on-year in October as higher tariffs imposed by the Trump administration reduced consumer demand and disrupted buying patterns in the world's largest apparel market.

The impact of the Trump administration's reciprocal tariff measures is increasingly being felt across almost all apparel-exporting countries, primarily due to a contraction in US consumption driven by higher import duties.

According to the latest data released by the Office of Textiles and Apparel (Otexa), the downturn was not limited to Bangladesh, as apparel shipments from nearly all major exporting countries to the US fell.

Otexa data shows that overall US apparel imports dropped by around 19% in October, reflecting weakening demand amid rising prices. Exporters attribute the slowdown largely to higher tariffs, which have pushed up retail prices and discouraged consumer spending.

Under the new tariff regime introduced from August, Bangladeshi apparel products are now subject to an additional 20% duty, taking the total tariff burden to 36%. China and India face even higher tariff rates, resulting in a sharper decline in exports from those countries.

In October alone, US apparel imports from China plunged by 53%, while imports from India fell by nearly 29%, according to Otexa.

Demand dampens in US due to inflation

Shehab Udduza Chowdhury, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told TBS that higher tariffs have fuelled inflation in the US apparel market. "Because of higher prices, consumers who used to buy five garments may now be buying only three," he said.

Shehab added that frequent policy changes under the Trump administration have created uncertainty among US buyers and global brands, prompting them to reduce inventory levels and avoid holding long-term stock. "Many buyers also rushed to place orders before the new tariffs came into effect on 7 August, leading to a subsequent drop in shipments."

He continued, "This could ultimately create a crisis in the US apparel supply chain, which may trigger another round of price increases."

Otexa data indicates that US apparel imports recorded growth between January and July, but began to decline after the new tariffs were enforced in August. China, the largest exporter to the US, has been the worst affected by the shift.

Bangladesh is relatively less affected

Bangladeshi exporters note that, compared with China and India, the export performance of Bangladesh, Pakistan and Cambodia has been relatively less affected.

Overall, US apparel imports fell by about 1% during the first 10 months of the year, from January to October, amounting to $66.63 billion, down from more than $67 billion in the same period last year.

Despite the recent slowdown, Bangladesh's garment exports to the US still grew by more than 15% over the ten months, although this was lower than the nearly 22% growth recorded between January and July. By contrast, US apparel imports from China declined by 32% during the same period.

The non-life insurance sector is gearing up for a fresh start as the Insurance Development and Regulatory Authority (IDRA) enforces a zero-commission policy, effective 1 January, suspending the licenses of individual agents, aiming to boost transparency, curb malpractice, and restore discipline across the industry.

Industry stakeholders believe that proper enforcement of the decision could help revive business growth and rebuild confidence in the sector.

Earlier, based on a proposal from the Bangladesh Insurance Association (BIA), the regulator adopted a policy to set zero per cent commission for individual agents in non-life insurance.

Although the issue of eliminating agent commissions had been discussed several times in the past, the initiative could not be finalised. This time, however, chief executives of general insurance companies have given both written and verbal assurances to the regulator, increasing optimism that the policy will be implemented effectively.

As part of the process, the IDRA had instructed all general insurance companies to submit proposals to suspend individual agent licenses. The final decision was taken after reviewing the information and recommendations submitted by the companies.

Brig Gen (retd) Md Shafique Shamim, secretary general of the Bangladesh Insurance Forum (BIF) and chief executive officer of Sena Insurance, told TBS that the move will significantly improve insurers' claims-paying capacity.

Currently, Bangladesh has 82 insurance companies, including 46 non-life insurers, of which 43 are listed on the stock market. Non-life insurers provide coverage for risks such as property, health, motor, marine, engineering, and liability, protecting individuals and businesses from financial losses arising from accidents, natural disasters, and other unforeseen events.

Monitoring mechanism in place

To support effective implementation, the Bangladesh Insurance Forum (BIF), an association of insurance company CEOs, has formed a five-member vigilance team. It will monitor compliance and report any violations of the zero-commission policy to IDRA, which will then take action in line with the Insurance Act 2010.

"Previously, out of Tk100 in business, many companies spent as much as 60% on illegal commissions, which severely weakened their ability to settle claims," Md Shafique Shamim said.

He added that with commission expenses now eliminated, company income and financial strength will increase, while operating costs will decline. "Ultimately, this will help raise insurance penetration in the country," he noted.

Shafique further said that since the agency system has now been abolished, the decision is practical and enforceable.

Why was the policy introduced

The decision was finalised at a meeting held on 25 November, attended by IDRA officials, representatives of the Bangladesh Insurance Association, and CEOs of non-life insurance companies. At the meeting, all participating CEOs pledged to operate their businesses without paying agent commissions.

For years, the regulator had been monitoring widespread irregularities involving individual agents, including excessive commissions, mis-selling of policies, misleading customers, and inflated or paper-based premium reporting.

IDRA also has evidence that some insurers concealed commission-related transactions through multiple software systems and undisclosed bank accounts.

Expected benefits and possible risks

According to IDRA, removing agent commissions will lower management costs for insurance companies and may improve profitability. Without commission-driven incentives, unnecessary policy sales are expected to decline, while premium pricing may become more realistic and affordable for customers. The practice of inflating premium income is also expected to decrease, encouraging healthier competition across the sector.

However, the policy also presents challenges.

As commissions were the primary income source for agents, many may exit the profession. The absence of agents could affect new business acquisition, while customer services such as premium collection, documentation, and claims assistance may also face disruption.

A senior executive of a non-life insurance company, speaking on condition of anonymity, told TBS, "Companies committed to ethical business will comply with the directive. But if some violate it, the entire sector will suffer."

He added that enforcement would be easier in Dhaka but significantly more difficult in smaller towns and districts.

A senior official at the Bangladesh Insurance Academy said that although the official agent commission rate was previously capped at 15%, in practice, some companies paid commissions of up to 50% through unofficial channels. "If all companies follow the new rule, their earnings will improve," he said.

He added that companies are likely to rely on Business Procurement Officers or Business Development Officers — salaried employees — to generate business instead of commission-based agents. However, he cautioned that excessively high salary structures could raise operating costs and undermine the benefits of the policy.

Brokerage gap remains a concern

Recently, former IDRA member Sultan-ul-Abedin Mollah said the zero-commission policy is not new. While it was introduced earlier under existing laws, weak enforcement led to its withdrawal. This time, IDRA is attempting a more structured rollout.

"Introducing the policy is challenging, but sustaining it will be even harder," he said, stressing the need for stronger institutional capacity, manpower, and monitoring mechanisms.

He also pointed out that countries such as India and Sri Lanka operate mainly through licensed brokerage houses rather than individual agents. In Bangladesh, however, insurance brokerage licenses have yet to be issued.

"Removing agent commissions without first introducing a brokerage system could create practical difficulties due to the lack of an alternative distribution channel," he warned.

The banking sector continues to be one of the most fragile segments of Bangladesh's economy, marked by weak capital adequacy, deteriorating asset quality and falling profitability, according to an assessment by the Centre for Policy Dialogue (CPD).

The findings were presented by CPD Executive Director Fahmida Khatun at a press conference at the organisation's Dhaka office today (10 January), as part of CPD's independent review of the state of the economy for the first half of the 2025–26 fiscal year.

CPD warned that persistent weaknesses in the banking system pose risks to overall economic stability and stressed the need for swift enactment and implementation of reform legislation.

It said restoring Bangladesh Bank's independence and authority, along with consistent application of the bank resolution framework, is essential to bring discipline back to the sector.

According to CPD, most banks are struggling to maintain adequate risk-based capital, with capital positions continuing to weaken across the sector.

Asset quality has also deteriorated significantly, with defaulted loans now accounting for about 36% of total loans, amounting to Tk5,44,549 crore – nearly 12 times higher than the level recorded in 2015.

An asset quality analysis of six banks showed that in some cases, the volume of distributed loans and defaulted loans has become almost equal, indicating severe financial stress.

Loan loss provisioning remains inadequate, covering only around 38% of classified loans, further weakening banks' ability to absorb losses.

At the same time, CPD noted that although liquidity is available in the banking system, demand for loans remains low due to prolonged stagnation in investment.

High interest rates and political uncertainty have discouraged private investment, leading to a decline in the loan-deposit ratio and leaving many banks with excess liquidity.

Bank profitability has declined sharply, while asset quality has fallen to its lowest level in nearly three decades, CPD said.

To address the crisis, the government has provided Tk20,000 crore in capital support to facilitate the merger of weak banks.

CPD acknowledged that some reform measures have been initiated, including asset quality reviews in six banks, with reviews already underway in three more and plans to extend the process to 17 banks in total.

It also noted steps to strengthen depositor protection by increasing deposit insurance coverage from Tk1 lakh to Tk2 lakh, as well as amendments to the Bank Resolution Ordinance and the Bank Company Act, 1991 to curb excessive family control and improve governance.

However, CPD cautioned that implementation remains the biggest challenge.

Political influence, vested interest groups, limited regulatory capacity and weak depositor confidence continue to undermine reform efforts.

It stressed the need to quickly translate legal reforms into fully enacted laws and ensure Bangladesh Bank's independence so that reforms are sustained and weak banks are not given concessions.

City Bank PLC has decided to construct a multi-storied office at Gulshan-2 in the capital at an estimated cost of Tk855 crore.

The bank announced the decision through a disclosure filed with the Dhaka Stock Exchange (DSE) on Thursday.

According to the disclosure, the bank's board of directors, in a meeting held on 7 January, decided to purchase approximately 20 katha of land on Gulshan Avenue to facilitate the construction. The purchase price for the land is Tk345 crore, inclusive of all related expenses.

This newly acquired land is adjacent to the bank's existing 20-katha plot in Gulshan. By combining these two parcels of land, the bank will now have a total of approximately 40 katha at the site, where the multi-storied building will be constructed.

The land purchase received approval from the Bangladesh Bank on 6 January 2026.

The bank stated that the project is subject to obtaining all necessary approvals from relevant regulatory authorities and ensuring full compliance with the guidelines and conditions stipulated by the central bank.

Following the disclosure, City Bank's share edged down by 0.396% to close at Tk25.80.

Earlier, City Bank has posted a remarkable surge in profits for the first nine months of 2025, as the lender strategically shifted towards risk-free investments in government securities amid an uncertain economic environment.

The bank's consolidated net profit rose 60% year-on-year to Tk720 crore in the January-September period, from Tk450 crore a year earlier. Earnings per share (EPS) climbed to Tk4.75, up from Tk2.96, reflecting strong earnings momentum across its investment portfolio.

"As a strategic initiative, City Bank's substantial investment in government securities led to a marked increase in investment income, effectively offsetting the decline in net interest income and supporting the coverage of escalating operational expenses," the bank said in its statement.

If the national election is held according to the timeline announced by the Election Commission, the new government will face the challenge of managing high Ramadan market prices immediately upon taking office. At the same time, analysts say certain policy decisions and actions taken by the interim government are creating financial and political pressure for the next elected government.

The new government will have to confront multiple challenges, including controlling high inflation, strengthening revenue collection to cover development and operating expenditures, increasing investment to generate new employment, restructuring a banking sector burdened by defaulted loans, and expanding foreign assistance.

Since assuming office, the interim government has increased operating expenditures in several ways. In particular, general and retrospective promotions have been granted within the public administration. Allowances for training, committee responsibilities, and other benefits have been increased. A new pay commission has also been formed, raising expectations among government employees that salaries will be increased, expectations that the next government will now have to address.

In addition, the government has accumulated substantial debt by borrowing at high interest rates to pay electricity subsidies, import fuel oil, and settle various arrears. Spending on social safety net programmes and fertiliser subsidies has also increased.

On the other hand, the interim government has reduced spending under the Annual Development Programme (ADP), leading to a decline in domestic demand. Accelerating ADP spending will be another challenge for the elected government. Overcoming the slowdown in revenue collection will also be a major hurdle.

Since the current government took office, several large industrial factories have shut down, while new investment has failed to materialise. As a result, many workers have lost their jobs, and new employment opportunities have not been created. Consequently, Bangladesh currently has a large unemployed population, and creating jobs for them will be a major challenge for the next government.

Controlling high inflation, overcoming weaknesses in the banking sector, and increasing revenue collection will also be key challenges. Beyond this, stimulating both domestic and foreign investment and expanding external cooperation will pose additional difficulties.

Managing social disorder and religious extremism will also remain a challenge.

Analysts believe improving internal political stability and foreign relations will be difficult. They note that the current government has banned the activities of the Awami League, a major political party in the country. Governing effectively while keeping such a large party banned will not be easy. At the same time, lifting restrictions on the party carries political risks that the government may not be able to take quickly. Maintaining the ban may also complicate foreign relations, as some countries may be reluctant to engage with a government that has banned the Awami League.

Inflation control

According to data from the Bangladesh Bureau of Statistics (BBS), inflation rose slightly in November, reaching 8.29%, up from 8.17% in October. Inflation has fluctuated over recent months but has remained around the 8% level. Inflation is expected to rise further during Ramadan.

Pressure from increased expenditure

After taking office, the current government recorded the lowest development expenditure in several years. In the 2024–25 fiscal year, only 67.85% of the ADP allocation was spent, the lowest level in more than a decade. ADP allocations have also been reduced in the 2025–26 fiscal year, with Tk2,38,695 crore allocated. Even from this reduced allocation, spending has fallen short.

During the first five months of the current fiscal year (July–November), only 11.75% of the ADP allocation was spent, the lowest on record. This has resulted in limited job creation, declining demand for private-sector goods, and negative trends in GDP growth. The next government will face pressure to increase development spending to stimulate employment and private investment. However, experts question where the funding for this increased spending will come from.

Former finance secretary Mahbub Ahmed told The Business Standard that job creation will be the biggest challenge for the elected government. "To address this, GDP growth must be boosted by increasing both public and private investment. Raising public investment will require higher revenue collection, which will not be easy. Increasing private investment will require improving the investment climate and restoring confidence, which in turn requires improving law and order and reducing administrative complexity—both of which are difficult tasks."

He added that increased government spending could fuel inflation, making inflation management another major challenge.

Revenue collection challenges

In the 2024–25 fiscal year, revenue collection fell short by Tk92,626 crore. For the current 2025–26 fiscal year, the government has set a revenue target of Tk4,99,000 crore through the National Board of Revenue (NBR).

In the first five months of the current fiscal year, NBR revenue grew by more than 15% compared with the same period last year, but collections still fell short of the target by Tk24,047 crore. Meanwhile, the government has taken on large volumes of both foreign and domestic debt, including high-interest loans.

Former NBR chairman Abdul Majid told The Business Standard that the elected government will face serious challenges in revenue collection. "The expected progress in revenue reform has not materialised. The NBR has been dissolved and split into two divisions, but it remains unclear when and how these divisions will begin operations. Bangladesh, therefore, continues to suffer from a low tax base and an opaque tax system, making additional revenue mobilisation difficult."

Overall, the elected government will face growing expenditure pressure and may be forced to rely once again on foreign borrowing.

Additional spending in public administration

The government has formed a pay commission to raise salaries for public servants. While the current government intended to introduce a new pay scale, it has not been able to do so, leaving the responsibility to the next government.

The last pay scale was implemented in 2015, when salaries were increased by 70% to 100%. Ten years later, a similar increase would raise government salary expenditure by nearly Tk84,000 crore, with pension costs also increasing.

Higher public-sector salaries will also create pressure to raise wages in the private sector, particularly in sectors where the government sets minimum wages. Overall wage increases in both sectors are likely to add inflationary pressure, which the next government will have to manage.

Weaknesses in financial institutions

The current government has merged five troubled Islamic banks to form a new entity, United Islamic Bank, injecting Tk20,000 crore in capital from the budget. Ensuring depositor confidence and recovering loans will fall to the next government.

As of September, defaulted loans stood at Tk6,44,515 crore, accounting for 36% of total bank lending. Seventeen banks have default ratios exceeding 50%, pushing them into capital shortages. Several financial institutions and insurance companies are also in distress, making revitalisation of the financial sector a major challenge.

Towfiqul Islam Khan, additional director (research) at CPD, told The Business Standard that the expected positive changes after the change in government have not materialised. There has been no significant improvement in revenue collection or government spending efficiency.

"The government is borrowing without fully assessing repayment capacity, while simultaneously taking steps that may increase future expenditure. Job creation has stalled, investment has stagnated, and regardless of who takes responsibility for the state next, they will have to confront challenges related to revenue mobilisation, debt repayment, rising expenditure, employment generation, and revitalising investment," he said.

The Centre for Policy Dialogue (CPD) has urged the next elected government to implement immediate and politically challenging reforms – particularly in banking, energy, revenue mobilisation and food supply – to stabilise the economy and restore confidence.

The think tank cautioned today (10 January) that delaying tough decisions early in the government's term could sharply increase both economic and political costs. With revenue targets under strain, banks posting historically low profitability and investor confidence already weakened, the CPD said reform momentum must be restored quickly to stabilise expectations among businesses, lenders and consumers.

In its latest Independent Review of Bangladesh's Development 2025-26, the CPD flags multidimensional risks across public finance, food security, banking, energy and trade. While export earnings and foreign exchange reserves have provided a degree of stability, the organisation warned that weak revenue mobilisation, entrenched inflation, deteriorating bank health and prolonged policy uncertainty could undermine growth and social stability without decisive action.

The CPD stressed that rebuilding confidence will depend less on new policy announcements and more on credible execution through experienced leadership at key institutions, transparent communication with stakeholders and sustained implementation of reforms initiated under the interim administration.

Revenue collection rises 16.7%, but meeting target still challenging: CPD

CPD Executive Director Fahmida Khatun presented the findings of the state of the economy for the first half of the 2025-26 fiscal year at a press conference at the organisation's Dhaka office.

Banking sector remains most fragile area

The banking sector continues to be one of the most fragile segments of Bangladesh's economy, marked by weak capital adequacy, deteriorating asset quality and falling profitability, Fahmida said.

The CPD warned that persistent weaknesses in the banking system pose risks to overall economic stability and stressed the need for swift enactment and implementation of reform legislation.

It said restoring Bangladesh Bank's independence and authority, along with consistent application of the bank resolution framework, is essential to bring discipline back to the sector.

According to the CPD, most banks are struggling to maintain adequate risk-based capital, with capital positions continuing to weaken across the sector.

Asset quality has also deteriorated significantly, with defaulted loans now accounting for about 36% of total loans, amounting to Tk5,44,549 crore – nearly 12 times higher than the level recorded in 2015.

At the same time, the CPD noted that although liquidity is available in the banking system, demand for loans remains low due to prolonged stagnation in investment.

High interest rates and political uncertainty have discouraged private investment, leading to a decline in the loan-deposit ratio and leaving many banks with excess liquidity.

Import reliance and LNG spending threaten energy security

The CPD warned that import dependency in the power and energy sector is increasing.

It noted that the sector is facing multiple pressures, including an outstanding payment burden of Tk20,000 crore that must be repaid, stagnant production capacity, and a continued reliance on imported fuel.

Food supply shows no improvement despite easing inflation: CPD

It said Tk58,000 crore is expected to be spent on LNG imports alone, a situation the CPD described as a matter of grave concern for energy security.

The think tank pointed out that transmission lines have increased by 12.5% and distribution lines by 1.25%, with some growth in renewable-based generation.

Coal use has increased by 3% over the past one and a half years, which the CPD flagged as concerning at a time when the interim government has committed to a zero-carbon path.

It noted that 34 cancelled solar power projects have weakened investor confidence, and that implementation processes remain slow and complex, preventing expected benefits from materialising.

The CPD recommended reducing dependency on LNG imports, shutting down inefficient old power plants, and phasing out tax exemptions on fossil fuels.

It said such incentives should instead be directed towards renewable energy.

According to the organisation, these measures are achievable within the first 100 days of the new government after the election next month.

Revenue target challenging

The CPD said that although the country's revenue collection has grown by 16.7% in the first six months of the current fiscal year, achieving the annual target will be challenging.

On the public financial system, the organisation said both revenue mobilisation and expenditure management are critical areas that will need attention.

It also observed that the interim government initiated some reforms, but these will need to be completed by the incoming administration.

To reach the full-year goal, an additional 3% growth would be required, which the CPD noted as challenging given current trends.

Food supply shows no improvement despite easing inflation

The CPD said there has been no improvement in Bangladesh's food supply system in the first half of FY26, warning that structural weaknesses continue to keep prices elevated despite easing global trends.

The organisation said weaknesses in storage, distribution and market competition remain unresolved, contributing to persistently high food prices.

The CPD pointed out discrepancies in the domestic market, saying the country produces more rice than its estimated demand.

It pointed out that annual demand stands at 41 million tonnes while production is 44 million tonnes, highlighting weaknesses in supply management.

The organisation also noted a decline in agricultural labourers' wages, even as food prices continue to rise.

On policy recommendations, the CPD stressed that inflation cannot be reduced merely through higher market interest rates.

It said increasing supply, preventing hoarding and enhancing market competition are necessary to stabilise prices.

The organisation called for an integrated food policy framework to ensure effective imports, maintain adequate food stock, and streamline supply and transport systems.

Q&A session

In response to a question, Fahmida said, "We want the upcoming election to be fair, neutral, and participatory. The election candidates will use money according to the policy that the Election Commission (EC) has formulated regarding the use of funds. The EC will ensure that there is no excessive use of money. We wish for there to be no violence of any kind, and that the general public can cast their vote by going to the polling stations."

Addressing the risks of rising coal-based electricity use, CPD Distinguished Fellow Professor Mustafizur Rahman warned that Bangladesh's RMG sector relies on electricity generated from coal plants, which could trigger carbon-related penalties under export conditions.

He said higher coal use may create obstacles for Bangladeshi products entering international markets, beginning with the European Union and potentially extending to other destinations.

Responding to another question, Fahmida said that Bangladesh's biggest problem is that investment is declining, and for quite some time, there has been no significant jump in investment. "Employment will not be created unless the private sector develops."

Regarding Bangladesh's potential, she said that the country's potential lies in its energetic young population.

In response to another question, Prof Mustafizur said that over-valued mega projects have been implemented using foreign loans without properly considering the economic and financial returns. "Caution is necessary regarding this in the future."

He strongly advised placing the greatest emphasis on increasing revenue collection, particularly collecting revenue from direct income/taxes.

Regarding the issue of the debt trap, Fahmida said, "Transparency and accountability are necessary in the use of loan funds."

Bangladesh’s readymade garment exports to the United States, the country’s largest single-market destination, grew more than 15 percent year-on-year to $7.08 billion in the January-October period, according to US government data.

Local apparel makers say the surge was largely driven by front-loaded shipments ahead of the Trump administration’s reciprocal tariff enforcement.

A temporary 10 percent baseline tariff was applied by the US from part of April to the entire July before higher country-specific rates took effect on August 7 last year. It added with the existing 16 percent, taking the total rate to around 26 percent.

During the low baseline tariff period, local apparel makers say American buyers brought in larger-than-usual consignments. Apparel exporters said this rush pushed overall shipments in the January-October window above normal levels, somewhat masking the basic trend for the rest of the year.

For Bangladesh, a punishing 35 percent reciprocal rate was initially announced in April last year. It was later revised to 20 percent after bilateral negotiations.

The growth came amid a largely flat US apparel market. Total imports from the world by the United States declined 0.61 percent year-on-year to $66.63 billion during the January-October period last year, according to the Office of Textiles and Apparel (OTEXA), an agency under the US Department of Commerce.

Similar to Bangladesh, most other major exporting countries also saw positive growth in the American market during the period.

Vietnam’s exports to the US rose 11.5 percent to $14.16 billion, India’s 8.6 percent to $4.39 billion, Pakistan’s 12.3 percent to $2.02 billion, Indonesia’s 10.1 percent to $3.98 billion, and Cambodia’s 25.5 percent to $4.04 billion.

China was the exception, with exports to the US falling 32.4 percent to $9.49 billion.

During the period, unit prices of Bangladeshi garments declined slightly, reflecting intense competition and cautious buying by US retailers, according to OTEXA data.

The unit price for Bangladeshi items declined 0.63 percent. The decline for Vietnam was 0.46 percent and 10.47 percent for China. Cambodia’s price declined by 7.26 percent, Pakistan’s 6.85 percent and Indonesia’s 2.72 percent, show OTEXA data.

In the case of India, the unit price increased by 1.57 percent during January-October.

Despite the strong headline growth, exporters said momentum began to ease after August. Shipments weakened in October and November, following the enforcement of the higher tariffs.

Anwar-ul Alam Chowdhury (Parvez), former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the January-October figures do not fully reflect the year’s underlying trend.

“The growth was concentrated in the early months, when shipments were rushed ahead of tariff enforcement,” he said.

Parvez added that export performance slowed after August but expects shipments to stabilise after Bangladesh’s general election next month, as international buyers are likely to place full work orders once the heated political atmosphere cools off.

Meanwhile, retail sales in the United States posted solid year-on-year growth in November, with early holiday-season activity keeping results on track to meet the National Retail Federation’s (NRF) 2025 spending forecast, the organisation said in a statement recently.

It means the retail buying is likely to consume the fashion inventory, prompting the US buyers to place fresh orders.

“Retail sales showed healthy year-over-year gains in November, while month-on-month data was largely flat,” NRF President and CEO Matthew Shay said.

For large apparel manufacturers like Bangladesh, it is positive news on the export front.

Shay said, “Shoppers looking for online deals may have held back a bit until Cyber Monday, which fell in December this year due to a late Thanksgiving, likely shifting some spending. Consumers are focusing on value and spending carefully during the holiday period, and retailers are offering products at competitive prices to fit every budget.”

“We remain confident in our holiday forecast as well as our retail sales projections for the full year,” he concluded.

Auditors have found major documentation gaps over about Tk76 crore in cash withdrawn by listed Fortune Shoes Limited during the 2024-25 financial year, leaving the funds untraceable.

The audit was conducted by G Kibria & Co, Chartered Accountants, which reported that the company withdrew the funds from a regular account maintained with Islami Bank through 207 cheques.

However, the company failed to provide necessary documentation – such as the cash book, bank book, cheque counterfoils, invoices, vouchers, and delivery challans – to verify the use of the withdrawn funds.

The absence of even the cash book made it impossible for the auditors to confirm whether the money was used for legitimate business purposes.

On Thursday (8 January), the share price of the company closed at Tk14.40 on the Dhaka stock exchange.

The audit report also highlighted Tk19.73 crore in insurance claims related to fire damage to raw materials and finished goods in 2022, which the company had included in its financial statements.

Of this, Tk13.65 crore was claimed from Takaful Insurance Limited and Tk6.08 crore from Prime Insurance Company Limited. Nearly three years have passed, yet the claims remain unsettled.

No correspondence or documentation regarding the likelihood of recovery was provided to the auditors, raising significant uncertainty over the realisability of the claims.

The auditors further noted that although Fortune Shoes declared and approved dividends for the 2022, 2023, and 2024 financial years, the full amounts were not distributed. Dedicated dividend accounts were opened with Prime Bank PLC, but the entire approved amounts were not transferred.

As a result, Tk10.05 crore in dividends remained unpaid as of 30 June 2025, in violation of applicable laws and regulations.

Material discrepancies were also found between the company's accounting records and its monthly VAT returns. According to the auditors, differences included Tk143.63 crore in revenue, Tk13.86 lakh in local raw material purchases, and Tk40.21 crore in imported raw material purchases, indicating significant reporting inconsistencies.

The audit report additionally raised concerns over employee retirement benefits. Fortune Shoes does not maintain any approved provident fund or gratuity scheme.

Instead, an employee-initiated fund is being operated without proper authority and is not subject to regular audits, which is contrary to the Financial Reporting Council (FRC) requirements.

With optimism surrounding the upcoming election next month, capital market investors are reshuffling their portfolios toward blue-chip and fundamentally strong stocks, as increased buying appetite pushed these shares to the top of the turnover chart last week.

Riding on strong trading driven by investors' sector-specific concentration in blue-chip and bank stocks, turnover at the Dhaka Stock Exchange (DSE) surged by 34% last week, while all indices posted gains, data showed.

The other two indices – DS30, the blue-chip index, and DSES, the Shariah index – gained 45 points and 4.8 points respectively, to close at 1,915 and 1,011.

Throughout the week, total turnover stood at Tk2,373 crore, with average daily turnover of Tk474.54 crore – up 34% from the previous week.

In its weekly market commentary, EBL Securities said the benchmark index of the capital bourse extended its upward trajectory over the week, carrying forward New Year optimism, as dominant buying interest prevailed amid expectations of moderation in prevailing market uncertainties.

"Investors selectively repositioned into heavyweight banking stocks amid improving sectoral expectations and perceived clarity on the political front, which added strength to the market's upward trajectory," it said.

"While intermittent profit-taking emerged as cautious participants booked recent gains, buying interest ultimately outweighed selling pressure by week's end, driven by strong accumulation in particular large-cap stocks," the commentary added.

Investors were mostly active in the banking sector, which contributed 19.5% of total turnover, followed by the textile sector at 13.9% and the pharmaceuticals sector at 13.0%.

DSE data showed that of the top ten turnover stocks, nine were from the A category, while one was from the B category. Orion Infusion led the turnover chart with a 4.83% share of total turnover, followed by Square Pharmaceuticals, City Bank, Uttara Bank, and Fine Foods.

On the gainers' front, mostly A- and B-category stocks dominated the top ten gainers. Tallu Spinning Mills, a Z-category stock, topped the chart with a 20.29% rise in share price to Tk8.30 each, followed by GQ Ball Pen, which rose 16.33% to Tk527.10, Pubali Bank by 14% to Tk36.60, Islami Bank by 12.65% to Tk37.40, and NRB Bank by 11.29% to Tk6.90.

Meanwhile, Z-category stocks – mostly weak non-bank financial institutions – dominated the top ten losers. Peoples Leasing, Fareast Finance, FAS Finance, Premier Leasing, and International Leasing featured prominently on the losing list.

Companies turn to the stock market to raise long-term capital and ease balance-sheet pressure, particularly when bank borrowing becomes costly. Yet even as lending rates in Bangladesh climbed to 14–15% from single digits over the past two years, the equity market has remained effectively closed to new issuers.

In a striking anomaly, not a single initial public offering (IPO) has been brought to market by any of the country's 66 licensed merchant banks in nearly two years since March 2024. Over the same period, India hosted more than 370 IPOs in just one year.

The freeze goes beyond a cyclical market downturn. Since the 2024 political transition and the appointment of a new securities commission, capital-raising through public offerings has stalled entirely, leaving the primary market dormant for more than one and a half years and steadily eroding confidence among issuers and investors.

Widespread regulatory non-compliance

Regulatory data suggest that the paralysis is also self-inflicted. According to the Bangladesh Securities and Exchange Commission (BSEC), 42 out of 66 merchant banks have failed to submit even a single effective IPO proposal within the legally mandated timeframe, in clear violation of the Public Issue Rules in force since 2010. The remaining institutions did submit proposals, but those applications were rejected.

The rules are explicit: every merchant bank must place at least one documented public issue proposal before the regulator within any two consecutive calendar years. The scale of non-compliance points to a deeper structural failure, raising questions about why so many licences were issued without ensuring market contribution.

Market participants acknowledge that political uncertainty and increasingly stringent listing criteria have discouraged companies from going public. However, economists and regulators argue that many merchant banks have long retreated from their core mandate, opting instead for proprietary investments, private placements and short-term financing — activities that generate quick returns but add little to market depth.

The result is an overcrowded but largely inactive intermediary landscape, sharply at odds with regional peers where merchant banking licences are closely tied to deal origination and capital mobilisation.

Analysts warn that without decisive regulatory action — through consolidation, licence cancellation or tougher enforcement — Bangladesh risks entrenching a prolonged IPO drought that undermines capital formation and long-term growth.

Regulator response

BSEC spokesperson Abul Kalam told The Business Standard that ongoing reforms to the Public Issue Rules do not prevent merchant banks from submitting new proposals.

"The Commission is regularly monitoring the activities of merchant banks. Legal action will be taken against those who fail to comply with the rules," he said.

He added that the "Merchant Banker and Portfolio Manager Rules" are currently being updated and are expected to address many of the systemic weaknesses once implemented.

Professor Abu Ahmed, chairman of the Investment Corporation of Bangladesh (ICB) and a noted economist, said that while the current economic downturn makes entrepreneurs wary of achieving fair pricing, merchant banks must take responsibility for identifying and encouraging quality companies instead of remaining inactive.

What merchant banks are meant to do

The main activities of merchant banks include issue management, underwriting, portfolio management services, corporate advisory services, and fund-raising and loan syndication.

However, with the prolonged IPO freeze and capital market downturn, corporate advisory services have been severely affected. Consequently, the business of most institutions in this sector has practically collapsed.

42 firms fail regulatory compliance, why?

The list of institutions that have failed to submit a single effective IPO proposal includes several prominent names, such as AB Investment, BRAC EPL Investment, EBL Investments, MTB Capital, NBL Capital and Equity Management, Shanta Equity, UniCap Investments, and many others across bank-sponsored and private entities.

Merchant bankers argue that the environment, rather than their lack of effort, is to blame.

They contend that the massive political shift following the fall of the Sheikh Hasina government has left entrepreneurs in a state of paralysis. Since the new Commission took charge, no major public offerings have been approved.

Industry insiders estimate that around Tk1,000 crore worth of capital-raising applications were either cancelled or withdrawn amid ongoing amendments to the Public Issue Rules. According to merchant banks, rejected or withdrawn applications damage the reputation of both issuers and issue managers, discouraging future attempts.

Faced with regulatory uncertainty and evolving criteria, many banks have opted not to submit new proposals at all.

Impacts on merchant banks

A merchant bank official, speaking anonymously, said, "Except for the top 10 firms, most merchant banks are in a poor state. Many have resorted to layoffs, and in several cases, paying regular salaries has become difficult. In some places, one month's salary is paid only every three months."

He added, "At one firm, only an officer and a peon remain, and the officer hasn't received a salary for several months. According to him, the political transition has brought many merchant banks' operations to a complete halt, leaving them unable to manage an IPO."

Meghna Capital Management Limited is an affiliate of Meghna Group of Industries (MGI). The company was licensed as a full-fledged merchant banker by the BSEC on 22 May 2018. However, it currently has no active operations in IPO management.

Structural weakness and the "easy profit" trap

Experts, however, suggest that arguing on political instability is only a partial picture. Many merchant banks have drifted away from their core responsibility — identifying and grooming quality companies for the market. Instead of the rigorous work of IPO management, documentation, and corporate restructuring, many firms have pivoted toward "easy profit" activities.

These include managing their own investment portfolios, trading placement shares, and engaging in short-term high-interest financing. A significant number of these institutions exist merely to "hold the license," contributing nothing to the primary market's growth.

Furthermore, there is a chronic shortage of skilled human resources in corporate finance, valuation, and legal compliance within these banks, making it difficult for them to provide high-quality advisory services to potential issuers.

Regional contrast

Bangladesh's experience contrasts sharply with that of neighbouring countries. In India, the Securities and Exchange Board of India (SEBI) maintains strict oversight of merchant bankers. Firms that fail to originate deals within a specified timeframe face licence suspension or cancellation.

In 2025, India had around 102 registered merchant banks, of which only 25–30 were actively involved in IPO origination. Even so, they facilitated roughly 373 IPOs and SME listings in a single year.

Similar accountability frameworks exist in Pakistan, Malaysia and Thailand, where investment banking licences are directly tied to capital market performance.

'Licenses should be cancelled'

ICB Chairman Abu Ahmed attributed this crisis to flawed policies and political favouritism in the past.

"In the past, far more merchant banking licenses were issued than necessary, and in many cases, political affiliation was prioritised over professional competence. This has harmed the sector. The time has come to weed out the inactive institutions. Those who haven't brought a single IPO to the market in years should have their licenses cancelled immediately," he stated.

A CEO of a merchant bank echoed this sentiment, saying, "If merchant banks limit themselves to their own portfolios and placements, the equity crisis will persist. We have too many 'paper' merchant banks. We should consider merging weak and inactive firms to increase competitiveness."

Private sector forced to go for high-cost bank loans

With fundraising from the stock market coming to a halt, private sector entrepreneurs are unable to implement their business plans, and in many cases, are forced to postpone them. Under these pressures, many have become reliant on bank loans to fund company expansion and sustain ongoing operations.

What is the way out?

HA Mamun, vice president of UCB Investment, proposed a three-step solution to revive the primary market: Ensure only active and capable players remain in the market; Increase the pace and predictability of the listing approval process to regain issuer confidence; Treat the issuance of corporate bonds and preference shares as equivalent to listing mandates to keep merchant banks active.

Rubayet-E-Ferdous, CEO of Shanta Equity, remains cautiously optimistic. While acknowledging that the absence of an IPO pipeline has forced banks to look for alternative revenue streams like corporate advisory and debt instruments, he believes that once the new rules are enacted and market conditions stabilise, IPO activity will see a revival.

Foreign investors pared their exposure to Bangladesh's capital market in December, pulling out a net Tk119–120 crore, with the bulk of the sell-off concentrated in a handful of large-cap and fundamentally strong stocks such as Summit Alliance Port, Grameenphone, City Bank and Square Pharmaceuticals.

Data from the Dhaka Stock Exchange (DSE) shows that while foreign investors sold shares worth around Tk120 crore during the month, their purchases amounted to only about Tk60 lakh, resulting in a sharp net decline in foreign holdings.

Among the most notable reductions was that of Summit Alliance Port, where foreign shareholding plummeted from 3.69% in November to just 0.01% in December, resulting in a withdrawal of nearly Tk38 crore.

City Bank also saw a significant drop, with foreign ownership falling by 0.64 percentage points to 5.40%, equivalent to a reduction of more than Tk25 crore.

Grameenphone followed a similar trend, as foreign holdings declined from 0.87% to 0.80%, cutting exposure by roughly Tk24 crore.

Square Pharmaceuticals, one of the most widely held stocks among overseas investors, witnessed a decrease of Tk14 crore as foreign shareholding edged down to 14.52%.

Smaller reductions were recorded in BRAC Bank, Renata, Olympic Industries and Jamuna Oil, while marginal increases were observed in Prime Bank, LankaBangla Finance, National Bank and a few other firms.

Overall, total foreign investment in the Dhaka bourse now stands at around Tk13,000 crore. Of the roughly 360 listed companies, only about 132 currently have any foreign shareholding, underscoring the narrow base of overseas participation in the market.
Infographic: TBS
Infographic: TBS

BRAC Bank continues to top the list of companies with the highest foreign shareholding at 36.06%, followed by Olympic Industries at 32.83%, Beximco Pharmaceuticals at 27.35% and Navana Pharmaceuticals at 19.64%.

Market participants say the recent decline reflects a mix of stock-specific exits and broader portfolio rebalancing rather than a loss of confidence in Bangladesh's equity market.

According to brokerage officials, a large portion of the recorded foreign investment actually comes from expatriate Bangladeshis. They note that genuine foreign institutional investors are actively present in no more than 25 listed companies, primarily large-cap firms with relatively strong fundamentals and liquidity.

Norway's sovereign wealth fund, a limited number of UAE and EU-based institutions are among the key foreign players in the market, according to market insiders.

A managing director of a leading brokerage firm said foreign investors remain cautious due to the limited scope for diversification, as Bangladesh has a relatively small pool of investable large-cap stocks that meet the risk, governance and liquidity standards of global institutional funds.

Ahsanur Rahman, chief executive officer of BRAC EPL Stock Brokerage, pointed out that December traditionally sees portfolio adjustments, as foreign institutions prepare year-end financial statements and rebalance their holdings in line with global asset allocation strategies. Such rebalancing often leads to temporary outflows, particularly from frontier and emerging markets, as funds lock in profits or adjust exposures to manage risk.

He further said, "Some foreign investors often visit our office, and they express their interest in investing in the country's capital market. We hope that the ongoing country's tussle situation will be improved, and after that, the foreign investment may increase."

Analysts also note that many global funds track FTSE equity country benchmarks, and Bangladesh's continued partial exclusion from these indices remains a structural challenge. The country was removed from FTSE indices following the imposition of floor prices on stock movements, which constrained price discovery and liquidity.

Although the Bangladesh Securities and Exchange Commission has gradually lifted most of these restrictions since January last year, floor prices remain in place for shares of two companies, keeping them excluded from the FTSE universe.

Gold prices in Bangladesh are set to rise again, as the Bangladesh Jewellers Association (Bajus) has announced a new rate of Tk 227,856 per bhori, effective from tomorrow (January 11).

The latest revision marks a 0.46 percent increase, or Tk 1,050 per bhori, Bajus said in a statement today.

The association attributed the hike to rising prices of pure gold in the domestic market.

Businesspeople said the country’s retail gold market has remained volatile in recent months, influenced by fluctuations in global gold prices, steadily increasing costs of pure gold, and ongoing economic uncertainty.

Data from December show that retail gold prices were revised 12 times during the month, highlighting the extent of market instability.

Gold prices in Bangladesh have risen sharply over the years.

The metal first crossed Tk 50,000 per bhori in January 2018. Five years later, in July 2023, it surpassed Tk 100,000. Prices climbed to Tk 150,000 per bhori in February 2025 and later surged past the Tk 200,000 mark within the same year.

After the interim government kept bank lending rates high for about one and a half years to reduce inflation, Finance Adviser Salehuddin Ahmed acknowledged that tight monetary policy alone cannot cool soaring prices.

At a programme in Dhaka yesterday, he said inflation control also requires effective supply-side management, stronger market supervision and cooperation from both businesses and consumers.

Even so, the adviser leaned towards maintaining the current policy stance, saying that an abrupt cut in interest rates could hurt the wider economy.

Local business leaders have long pressed for lower lending rates, but Salehuddin said that the issue could not be settled through a single decision.

“Interest rates are often discussed as if simple solutions exist, but lowering rates in one area can create pressure elsewhere in the economy,” he told the publication ceremony of the Banking Almanac at the CIRDAP auditorium in the capital.

Referring to the recent fall in treasury bill yields, he said the impact would gradually feed through to the market. However, higher returns on treasury bills or savings instruments could pull deposits away from banks, posing risks to the financial system.

The former Bangladesh Bank governor said the core role of the banking sector is to bridge savings and lending. “Banks and non-bank financial institutions play this intermediary role, and any weakness in this structure negatively affects the entire economic system.”

On the Banking Almanac, Salehuddin said the publication does not offer direct investment guidance, but it is an important data source for analysing the banking sector. It contains key information including paid-up capital, authorised capital, capital ratios, provisioning, retained earnings and credit-deposit ratios.

Discussing the health of the banking sector, he said conditions were critical when he took office in August 2024. Recent data analysis, however, shows early signs of improvement in provisioning and lending at some banks -- trends also reflected in the banking Almanac.

Calling on the media, Salehuddin urged journalists not to portray Bangladesh only in negative terms, but to highlight positive developments alongside constructive criticism. He said the country has made notable progress despite many constraints.

Abdul Hai Sarker, chairman of the Bangladesh Association of Banks (BAB), said the exact reasons behind high interest rates remain unclear.

Sarker, the chairman of Dhaka Bank, said banks are receiving funds from both the Bangladesh Bank and the government, yet lending rates remain high.

Despite adequate liquidity, banks are unable to invest because of an unfavourable business climate, he said, adding that weak law and order and low business confidence are discouraging fresh investment.

Sarker said politically driven bank approvals have eroded confidence and triggered capital outflows from the banking system.

High interest rates are also hurting exports by raising production and financing costs, weakening competitiveness in global markets, according to the BAB chairman.

Hossain Zillur Rahman, acting chairman of the board of editors of the Banking Almanac and a former adviser to the caretaker government, said business and entrepreneurial confidence remains a key challenge. He said this should be understood broadly to include farmers and small producers.

Economic democracy, especially access to credit and policy support for small and medium enterprises and grassroots actors, is another critical benchmark, he added.

“While inflation and daily economic comfort have shown mixed trends, persistent gaps remain due to inefficiencies in policy execution and supply chains.”

The economist said strong economic governance depends on quality data, professionalism, better norms, continuous monitoring and effective consultation with stakeholders.

Nazma Mobarek, secretary of the Financial Institutions Division at the Ministry of Finance, said that Bangladesh depends more on the money market than the capital market, leaving banks under growing pressure.

She said the Banking Almanac should include a chapter offering recommendations and possible exits from the crisis, including the problem of rising bad loans.

Md Khairuzzaman Mozumder, secretary of the Finance Division, said the financial sector has been passing through a difficult period over the past one and a half years.

He said some challenges, including letter of credit payment problems, have eased. The true scale of bad loans has now become visible following loan classification under international standards, he added.

Bangladesh Bank Deputy Governor Nurun Nahar also spoke at the event as a special guest. Mohammed Nurul Amin, a member of the editorial board of the book, made remarks on the publication.

The ceremony marking the seventh edition of the Banking Almanac was organised by ShikkhaBichitra with support from the Bangladesh Bank.

Paola Pampaloni, the visiting acting managing director for Asia-Pacific at the European External Action Service (EEAS), yesterday said the comprehensive partnership agreement (CPA) between Bangladesh and the EU would pave the way for deeper ties between the two partners and open up significant opportunities in trade and investment.

Pampaloni made the remarks during a courtesy call on Chief Adviser (CA) Professor Muhammad Yunus at the State Guest House Jamuna in Dhaka.

During the meeting, the two sides discussed issues concerning Bangladesh-EU relations, including negotiations on the framework agreement on the CPA, the upcoming general elections and referendum, combating illegal migration, and expanding trade and investment, according to a statement from the Chief Adviser's Office.

Pampaloni noted that the initiation of negotiations on the CPA in November 2024 came after 20 years during which there had been a general partnership agreement.

She congratulated the chief adviser for the "incredible and massive" work he has undertaken since assuming leadership of the interim government in August 2024, particularly in carrying out important reforms to which the EU, as Bangladesh's political and largest commercial partner, attaches great importance, and for ensuring peace and stability at a critical juncture for the country.

The senior EU official welcomed the progress made on the CPA between the EU and Bangladesh.

She said the pact would pave the way for deeper ties between the two partners and open up significant opportunities in trade and investment.

Yunus described the CPA as one of the most important agreements for Bangladesh and said it would "solidify" Bangladesh-EU relations.

Pampaloni said the head of the EU Election Observation Mission would arrive in Bangladesh later this week and is expected to hold a series of meetings with political leaders and relevant authorities.

Pampaloni stressed the importance of a peaceful election, saying Bangladesh-EU relations could reach new heights following a successful democratic transition, ushering in a new era of engagement between Dhaka and the world's largest economic bloc.

Lutfey Siddiqi, special envoy of the chief adviser; Lamiya Morshed, SDG coordinator and senior secretary; and Michael Miller, the European Union ambassador to Bangladesh, were also present at the meeting.