The Bank of Japan lifted its key policy rate to a 31-year high of 1.0 percent on Tuesday, warning of the risk of heightening inflation risks stemming from elevated crude oil prices due to the Middle East conflict and the weak yen.

The central bank, in the absence of Governor Kazuo Ueda who has been hospitalized for medical treatment, raised the short-term interest rate from 0.75 percent in its first hike since December, saying that the recent U.S.-Iran agreement to end the war is a positive development but still leaves uncertainties over the economy. The bank’s rate hike after keeping it steady at the three previous meetings brings its policy back on a normalization track after a decade of unorthodox easing that ended in March 2024.

The BOJ said in its statement that there is a risk of underlying inflation rising above its target of 2 percent as rises in crude oil prices lead companies to hike prices in business-to-business transactions “at a relatively fast pace,” which could “spread to an increase in consumer prices across a wide range of items.”

BOJ Deputy Governor Shinichi Uchida told a post-meeting press conference that the bank will continue to raise the rate to stabilize inflation at around the 2 percent target, judging that even after the latest hike financial conditions remain accommodative.

Uchida said that one of the major reasons behind the rate hike decision is reduced risks to the economy due to factors such as government measures to secure alternative sources of raw materials including imports of oil from regions other than the Middle East.

Uchida also said that the bank is watching currency moves carefully. On Tuesday afternoon in Tokyo, the U.S. dollar was trading above the 160 yen line, the level where the Japanese financial authorities intervened in the currency market just over a month ago to support the yen.

“We do not target specific exchange rates in guiding our monetary policy, but we engage in policy discussions on the view that currency moves have a crucial impact on economic and price developments,” he said.

Among the remaining eight policymakers excluding Ueda who discussed the policy change, the rate hike decision was opposed by Toichiro Asada, who joined the Policy Board in April and is viewed by the market as a proponent of reflationary policies and in favor of aggressive monetary easing.

In another policy change, the bank said it will pause the plan to reduce Japanese government bond purchases from the next fiscal year starting in April, at a time when long-term interest rates have been rising rapidly.

It will keep the current pace of reducing monthly purchases by about 200 billion yen every quarter for rest of this fiscal year, which would result in buying of around 2.1 trillion yen ($13 billion) per month in the last quarter of fiscal 2026.

But from April 2027 onwards, the bank will no longer reduce but steadily buy about 2 trillion yen a month under the new plan, citing the need to stabilize the bond market.

The BOJ decided in July 2024 to cut back its monthly government bond purchases as part of its efforts to normalize its monetary policy.

While raising the key policy rate could cool the economy by increasing borrowing costs for companies, restraining investment and dampening private spending, the central bank saw the need to respond to inflation risks following the launch of U.S.-Israeli attacks on Iran in late February and subsequent surges in crude oil prices.

The yen repeatedly falling to the 160 zone against the dollar, despite the Japanese authorities intervening in the currency market from late April to early May to curb the unit’s fall, has also stoked concerns about rising import costs for resource-poor Japan.

Even if the U.S.-Iran conflict ends following the two countries’ agreement to end the monthslong war, shipping through the Strait of Hormuz may not immediately stabilize, keeping transport, raw material and other costs elevated, analysts said.

But the agreement will relieve fears of disruptions in Japan’s supply chains, serving to reinforce the view that the economy is resilient enough to withstand further rate hikes, they said.

The decision to raise the rate puts the BOJ in line with other central banks shifting toward tightening of monetary policy amid inflationary pressures, such as the European Central Bank, which hiked its rate last week.

The two-day policy meeting was chaired by BOJ Deputy Governor Ryozo Himino, after Ueda was hospitalized to treat a hepatic cyst infection. Ueda’s hospitalization is “short and there will be no significant impact” on the BOJ’s steering of monetary policy, Uchida said.

Inflation risks have been flagged after Japan’s wholesale prices rose 6.3 percent in May compared to a year earlier -- the biggest increase in over three years. Firms are increasingly passing on rising costs from the war in Iran to the prices of their goods and services.

The data suggested that core consumer inflation may also accelerate, although it has been kept below the bank’s 2 percent target because of government subsidies for electricity, gas and gasoline, the analysts said.

The stagnation that has persisted in the rural economy for several years has intensified further. The flow of bank credit to rural areas has consequently continued to contract. Outstanding bank loans in the rural economy have not increased over the past year; instead, they have declined by more than BDT 45 billion, according to the central bank data. At the end of March 2025, outstanding bank loans in rural areas stood at around BDT 1.36 trillion. By March this year, that figure had fallen to around BDT 1.32 trillion.

The slowdown in the rural economy comes at a time when the country is receiving the highest remittance inflows in its history. Up to June 14 of the current fiscal year, expatriate Bangladeshis sent home $34.30 billion in remittances. In local currency terms, this amounts to more than BDT 4.22 trillion. A significant share of these remittances has flowed into rural areas. Since migrant families spend roughly two-thirds of remittance income on consumption, rural economic activity and demand for credit would normally be expected to strengthen.

Bankers, however, say that the rural economy has become largely subdued. The economic slowdown has forced many cottage, micro, and small industrial units in rural areas to shut down, while new ventures are not emerging. Demand for loans in rural areas consequently remains weak.

Many economists and stakeholders offer a different explanation. They argue that most banks lack the capacity to effectively extend credit to the rural economy. Despite years of urging, banks have failed to develop such capabilities. Initiatives introduced in the name of financial inclusion, such as agent banking and sub-branches, have primarily been used to mobilise deposits rather than expand lending. The ongoing crisis and instability in the banking sector have also negatively affected rural credit disbursement. To meet agricultural and rural lending targets set by the central bank, banks have become heavily dependent on microfinance institutions.

The main issue is a lack of demand for credit in the rural economy, said Mashrur Arefin, chairman of the Association of Bankers, Bangladesh (ABB). Speaking to Bonik Barta, the Managing Director of City Bank PLC, said: “Private-sector credit growth in the country has fallen to the range of 4 percent. In my entire banking career, I’ve never seen loan demand this low. If demand for credit is weak in urban areas, it’s not unusual that it has declined even further in rural areas. Many banks currently don’t even have the capacity to extend new loans. State-owned banks maintain a large branch network in rural areas, and we’re seeing stagnation in their credit growth as well.”

Mashrur Arefin noted City Bank is working to expand retail and small-scale lending through the extensive use of technology. “Through the MFS platform bKash, we’re providing unsecured digital nano loans ranging from BDT 500 to BDT 50,000. The outstanding balance of these microloans has now exceeded BDT 65 billion. Bangladesh Bank has announced new targets for agricultural and rural lending, along with several incentive packages. With political stability and a newly elected government having announced the budget, we hope that both the rural economy and the overall economy will recover quickly,” he further said.

Bangladesh Bank publishes Scheduled Banks Statistics every quarter, containing a wide range of banking-sector data. The latest edition shows that the total outstanding bank credit stood at around BDT 17.83 trillion at the end of March this year. Of this, around BDT 16.51 trillion was disbursed in urban areas, accounting for 92.59 percent of total bank lending. In contrast, outstanding credit in rural areas stood at only nearly BDT 1.32 trillion, representing just 7.41 percent of total bank loans, despite the rural economy contributing more than 30 percent to the country’s GDP.

Banks also collected nearly three times more deposits from rural areas than the amount of loans they disbursed there. At the end of March this year, outstanding rural deposits stood at approximately BDT 3.43 trillion, compared with around BDT 3.01 trillion in March 2025. This means rural deposits increased by BDT 424.80 billion over the past year. But outstanding bank credit in rural areas declined by BDT 46.12 billion during the same period.

Agricultural loans are also included within the total outstanding credit disbursed in rural areas. Outstanding agricultural loans stood at BDT 636.30 billion as of March this year, according to Bangladesh Bank data. But rather than increasing, the figure fell to BDT 632.47 billion in April. Banks have also become almost entirely dependent on microfinance institutions for the disbursement of agricultural loans.

Deposits collected from rural areas could have transformed the economy if they had been reinvested as loans within the same localities, believes Syed Mahbubur Rahman, managing director of Mutual Trust Bank. Speaking to Bonik Barta, he said, “It’s quite difficult for banks to deliver credit to the rural economy. Most banks lack both the capacity and the infrastructure required to extend such loans. Banks have consequently become dependent on NGOs for the disbursement of agricultural and rural credit.”

Regarding local lending, he said, “Services such as agent banking and sub-branches were introduced to promote financial inclusion. But marginalised communities haven’t yet fully benefited from these services. This is because banks are still using agents and sub-branches primarily to mobilise deposits. If the deposits collected from a particular area could be reinvested there as loans, the rural economy would become much more vibrant. Rural employment would increase as well. The opportunity hasn’t yet been lost. We’re trying to reach underserved communities through technology.”

Bangladesh has been experiencing high inflation for several years, while economic growth has slowed. GDP growth stood at 4.22 percent in FY 2023–24. It declined to 3.49 percent in FY 2024–25 and is projected to reach 4.14 percent in the current fiscal year. The inflation rate, meanwhile, stood at 9.42 percent in May, well above the target of reducing inflation to 6.5 percent set in the monetary policy.

Alongside economic stagnation, Bangladesh’s banking sector is also facing ongoing stress and instability. During the first quarter of the current year (January–March), non-performing loans (NPLs) increased by BDT 314.87 billion. By the end of March, total NPLs in the banking sector had reached around BDT 5.88 trillion, accounting for 32.26 percent of all outstanding loans.

The lending capacity of at least two dozen banks has become severely constrained. Even banks with excess liquidity or sufficient funds for lending aren’t extending adequate credit to entrepreneurs. Instead of increasing lending to the private sector, banks are showing greater interest in purchasing government Treasury bills and bonds. While private-sector credit growth has consequently fallen to 4.75 percent, credit growth to the government has exceeded 30 percent.

Former Chief Economist of Bangladesh Bank, Dr Mustafa K Mujeri, believes that survival itself has become increasingly difficult for rural entrepreneurs. Speaking to Bonik Barta, also the executive director of the Institute for Inclusive Finance and Development (InM), said, “The pressure of high inflation has made it extremely difficult for rural entrepreneurs to stay afloat. The decline in credit flows is also delaying their prospects of recovery and affecting their employment. Jobless people from rural areas are now migrating to cities. Banks and financial institutions need to become more proactive in providing credit in rural areas. The government must also come forward in this regard.”

The banks’ inability to adequately serve rural borrowers has led to the rapid expansion of microfinance institutions. The outstanding loan portfolio of 719 microfinance institutions, including Grameen Bank, has now reached BDT 2.05 trillion.

Government-supported organisations such as the Palli Karma-Sahayak Foundation (PKSF) and the SME Foundation have also expanded their activities in rural areas. Bangladesh Bank has now established a BDT 50 billion incentive fund for cottage and small entrepreneurs. PKSF has been entrusted with disbursing low-interest loans from this fund.

Commenting on the initiative, PKSF Managing Director Md Fazlul Kader told Bonik Barta, “The rural economy is experiencing a significant slowdown. To overcome this stagnation, microfinance institutions can play a more effective role than banks. PKSF is implementing a range of initiatives to address the situation. In addition to the BDT 50 billion being provided by Bangladesh Bank, another BDT 60 billion is being added through government support and our own financing. We’re working toward disbursing a total of BDT 110 billion in the rural economy. PKSF has more than three decades of successful experience as a catalyst for rural economic development and sustainable growth.”

The Executive Committee of the National Economic Council (Ecnec) yesterday approved a Tk 4,189 crore project to build supporting infrastructure for the Chinese Economic and Industrial Zone (CEIZ) in Chattogram’s Anwara.

Policymakers hope the CEIX will become one of Bangladesh’s largest foreign investment hubs, with project documents showing the zone is expected to attract at least $500 million in foreign direct investment and create more than 100,000 direct and indirect jobs once fully operational.

According to Planning Commission documents, Bangladesh sought a $221.18 million loan from China in 2018 for infrastructure development in the zone, and the Chinese government later agreed to finance the project under the its Preferential Buyer’s Credit (PBC) arrangement.

Of the total cost, Tk 1,722 crore will come from government funds, while Tk 2,467 crore is expected to be financed through loans under the PBC facility.

The project, titled Supporting Infrastructure Project for Chinese Economic and Industrial Zone, is likely to be implemented by the Bangladesh Economic Zones Authority (BEZA) between January 2027 and December 2031.

The CEIZ, being developed under a Bangladesh-China cooperation framework, is designed to attract export-oriented manufacturing investment and strengthen Bangladesh’s integration into regional and global supply chains.

Situated in Anwara on the southern bank of the Karnaphuli river, the economic zone enjoys strategic access to Chattogram Port, the Karnaphuli Tunnel and Shah Amanat International Airport, making it an attractive destination for foreign investors.

The Planning Commission said the project would enhance industrial competitiveness, promote export diversification and facilitate technology transfer through increased Chinese investment.

The project includes construction of a multipurpose jetty, connecting roads and a bridge, along with utility infrastructure such as water storage facilities, a gas pipeline, a central effluent treatment plant and waste management facilities.

It also includes two power substations, around 20 kilometres of transmission lines, and nearly 12 kilometres of boundary walls with security gates.

Planning ministry officials said the project would prioritise land development and installation of essential utilities to make the zone investment-ready.

Planning Secretary SM Shakil Akhter said the first phase would focus on roads, power transmission lines and other services required to attract industrial investors.

Beyond attracting investment, the economic zone is expected to improve the commercial viability of the Karnaphuli Tunnel by generating industrial traffic.

Once factories begin operations, increased movement of raw materials, machinery, cargo and workers between Chattogram city, the port and the industrial zone is expected to raise tunnel usage, which has remained well below initial projections.

Mohammad Mohsin Ul Alam Swapan, vice-president of the Chittagong Chamber of Commerce and Industry, said the economic zone would bring significant economic benefits to southern Chattogram.

“The project’s proximity to the Karnaphuli Tunnel will increase tunnel traffic while easing pressure on Chattogram city,” he told The Daily Star.

“In line with the vision of developing a ‘One City, Two Towns’ model, the economic zone is expected to attract not only Chinese investment but also substantial domestic investment in surrounding areas.”

He said investor interest had already begun to grow around the project, with around 100 small and large enterprises purchasing land near the economic zone to establish factories and industrial facilities.

“The economic zone is also expected to accelerate the transformation of Anwara into a major industrial cluster, complementing existing investments in energy, power and manufacturing projects in the area,” he added.

Currently, around 4,000 vehicles use the tunnel daily, far below the projected demand of 18,500–20,700. The tunnel generates approximately Tk 10-11 lakh in toll revenue per day, while operation and maintenance costs stand at Tk 37 lakh to Tk 38 lakh, leaving a daily deficit of around Tk 26 lakh to Tk 27 lakh.

According to BEZA, more than 100 Chinese companies from sectors including leather, light engineering, medical equipment and chemicals have already expressed interest in establishing factories in the zone.

The project has faced years of delays despite land acquisition for the nearly 800-acre zone being completed under bilateral agreements between Bangladesh and China. Infrastructure development was initially assigned to China Harbour Engineering Company, but the two sides failed to finalise an agreement.

In 2022, China Road and Bridge Corporation was appointed as the new developer and later formed a joint venture with BEZA to move the project forward.

Listed companies have called on Bangladesh Bank to overhaul its credit reporting rules, arguing that financially healthy firms should not be held back by the poor borrowing records of their directors or nominating institutions.

The Bangladesh Association of Publicly Listed Companies (BAPLC) has urged the central bank to implement a more pragmatic Credit Information Bureau (CIB) reporting framework to ensure that financially sound listed companies are not unfairly penalised for the adverse credit records of their nominating institutions or individual directors.

A high-level delegation of the association, led by its President Riad Mahmud, made the request during a meeting with Bangladesh Bank Governor Mostaqur Rahman held at the central bank headquarters in the capital today (16 June).

The meeting focused on resolving critical regulatory bottlenecks that currently hinder the operational flexibility and growth of the country's premier corporate entities.

At the heart of the discussion was the impact of CIB reporting on companies where nominee directors serve.

Under the current practice, if a nominating institution such as a parent company or a financial firm is flagged in the CIB for a default, it often creates significant hurdles for the company where its nominee sits on the board, even if that company is entirely compliant and profitable. The BAPLC delegation emphasised that such "proxy defaults" create undue difficulties in securing credit and maintaining business operations, and called for a fair framework where a company's creditworthiness is judged solely on its own financial health.

Furthermore, the association raised concerns over the systemic challenges faced by large business groups. Currently, the adverse CIB status of a single sponsor, director, or guarantor can effectively freeze the credit facilities of all other entities within the same group.

The BAPLC also requested the Bangladesh Bank to move away from this blanket approach and instead adopt a "balanced and entity-specific" evaluation. They argued that otherwise healthy and compliant entities should not be deprived of financing due to the financial distress or defaults associated with an individual or a sister concern.

Beyond CIB-related issues, the BAPLC leaders advocated for an expansion of the government's newly announced Factory Revival Fund. While they appreciated the initiative to reopen shuttered units, they requested that the facility be extended to include restructured but financially distressed factories that remain operational. These units, according to the BAPLC, often suffer from severe working capital shortages. Providing them with support would sustain industrial operations, protect thousands of jobs, and prevent viable industries from sliding into total operational suspension.

The delegation also observed that the national economy needs to pivot toward the capital market for long-term financing to mitigate the rising risks of non-performing loans (NPLs) in the banking sector. They noted that a greater reliance on equity and debt securities for long-term funding would not only deepen the capital market but also help banks reduce asset-liability mismatches. By diversifying funding sources, the corporate sector could achieve more sustainable growth while lowering the pressure on the banking system.

Never bet against Donald Trump? The oil market appears to have made a risky wager from day one of the Iran war: The US president would not allow the conflict to spiral into a full-blown economic crisis. So traders wouldn’t price one in, no matter what was happening with physical supplies. It was a risky call, but it proved correct.

Oil prices certainly swung during the three-and-a-half-month war, as Iran’s key weapon was the unprecedented closure of the Strait of Hormuz. Tehran was able to choke off a fifth of the world’s oil and liquefied natural gas supplies overnight, gaining significant leverage.

Benchmark Brent crude surged from around $70 a barrel before the war to a peak of $118 in late March, before sliding back to $83 after Washington and Tehran announced a preliminary deal on Sunday. Given that the supply disruption was one of the largest in modern history, these moves were remarkably restrained. Consider that oil prices surged to $123 a barrel in the aftermath of Russia’s full-scale invasion of Ukraine in February 2022. This reflected market fears about the partial disruption of Moscow’s oil exports, which had totalled around 7.5 million barrels per day (bpd) the previous year. That is around half the effective volume lost during the Hormuz blockade. For decades, a Hormuz shutdown has been treated as the ultimate doomsday scenario for oil markets. Yet when it finally happened, prices jumped, but they didn’t spiral.

BEND, DON’T BREAK

On the surface, the explanation is straightforward: the physical market did its job. The global energy system displayed extraordinary flexibility and resilience. Governments and companies released hundreds of millions of barrels from commercial and strategic stockpiles. Luckily for them, production had been running hot heading into the conflict, with inventories rising quickly, which helped cushion the blow.

Demand also adjusted. Once the war broke out, Chinese imports weakened sharply, and across much of Asia, governments imposed consumption curbs to dampen energy use. That helped prevent a deeper economic shock. The system bent, but it didn’t break. But that is only half the story, and arguably not the most important half.

TRUMP PUT

Look more closely, and the market’s response to the drawdown in global inventories tells a different tale. Stocks were depleted at an unprecedented pace during the war, falling at an average rate of 5.3 million bpd between March and May, according to the US Energy Information Administration. They were nearing dangerously low levels just as the northern hemisphere was entering peak summer demand. That should have been a flashing red warning sign. Instead, it appeared to reinforce confidence that a deal was near.

What explains this? The implicit bet was clear: Trump would not let the situation deteriorate to a point where US gasoline prices would surge to unmanageable levels and risk reigniting broader inflation, especially with midterm elections looming. Put simply, investors believed he would blink before the market cracked.

So the lower inventories fell, the closer a deal seemed. This pattern should be familiar. During Trump’s second term, markets have repeatedly learned to discount the most extreme outcomes implied by his rhetoric and initial policy moves, whether sky-high tariffs announced on “Liberation Day,” attacks on Federal Reserve independence, or threats to take over Greenland. His most aggressive moves have invariably been followed by retreats once financial markets began to wobble. The so-called “Trump put” is no longer just about equities, however. During the Iran war, it shaped commodity markets as well. Markets weren’t ignoring the risks. They were pricing in Trump’s limits.

YOU CAN ONLY GO SO FAR

But the oil market’s “Trump trade” has boundaries. Unlike equities, which can be buoyed by sentiment for extended periods, commodity markets are ultimately anchored in physical reality. And reality was catching up with the president – and energy traders. Despite the market’s remarkably effective response to the Hormuz shock, the loss of around 1.4 billion barrels of supply since the start of the war still punched a vast hole in global inventories. That gap has not disappeared. Yet the deal announcement has dramatically reduced the risk of a massive spike in oil prices – a warning that was sounded only two weeks ago. The challenge now is that supply and demand are unlikely to recover in step, pointing to a period of volatility.

On the one hand, demand could spike. Refiners, traders and governments that drained inventories during the crisis will have to refill them. That will create a new wave of demand that could tighten markets as summer demand peaks and supply buffers remain thin. The strain is already visible in the United States. After pushing exports to record levels during the crisis, US crude inventories have fallen to their lowest since 2004, while gasoline stocks are at their lowest since 2014.

On the other hand, supply could recover faster than many anticipate as revenue-starved Gulf producers scramble to regain market share. This could ultimately lead to a bigger price drop than traders are currently pricing in.

TRADING THE TRUMP

Throughout the war, Trump’s jawboning of oil markets was effective, repeatedly boosting investor expectations for a quick resolution even as conditions on the ground deteriorated. The US-Iran deal announced on Sunday was vague and offered limited gains for Washington. But it arrived just as the market was running out of room. Its timing was probably not a coincidence. Investors understood that Trump’s tolerance for market pain had limits, and those limits mattered as much as pipelines, tankers and storage tanks. They bet on it. This time, they were right.

Bangladeshi banks have emerged as the weakest in South Asia in their ability to absorb financial shocks, after a large volume of previously hidden bad loans came to light following the fall of the Awami League-led government in August 2024.

As these losses surfaced, capital buffers of banks were eroded, pushing their capital adequacy ratio into negative territory by the end of 2025, according to Bangladesh Bank’s latest Financial Stability Report yesterday.

The capital adequacy ratio, also known as the Capital to Risk-Weighted Assets Ratio (CRAR), measures how much money a bank holds as a safety cushion against risky lending. In simple terms, it shows whether a bank has enough capital to absorb losses if borrowers fail to repay loans. A negative ratio means losses have wiped out that buffer entirely.

At the end of 2025, Bangladesh’s CRAR stood at minus 2.64 percent. By comparison, it was 17.20 percent in India as of September last year, 19.40 percent in Sri Lanka, and 20.80 percent in Pakistan at the end of 2025.

Under international Basel III rules, banks are expected to maintain a minimum capital adequacy ratio of 10 percent, plus an additional 2.5 percent buffer to protect against financial stress. Bangladesh is now far below that threshold.

The central bank report shows that Bangladesh’s banking sector was relatively stronger until 2023, but its financial position deteriorated drastically from 2024 after the political changeover.

In 2024, the sector’s capital adequacy ratio stood at 3.08 percent, compared with 16.7 percent in India, 20.6 percent in Pakistan and 18.4 percent in Sri Lanka.

Banking sector insiders say the collapse shows years of irregularities and large-scale financial scams during the Awami League government, which led to massive losses that were not fully disclosed at the time.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank and a former chairman of the Association of Bankers, Bangladesh (ABB), said the capital position of the banking sector has turned negative due to widespread financial scams.

According to Rahman, a number of banks have also availed themselves of regulatory deferral facilities. These are temporary measures that allow banks to delay recognising losses or meeting certain regulatory requirements, often used to ease short-term pressure on their balance sheets.

He said the situation could worsen further once these facilities are withdrawn or expire.

Bangladesh’s banking sector has long operated with lower capital levels than its regional peers, averaging around 11 percent in recent years. However, the ratio saw a steep decline of more than 8.5 percentage points from 11.64 percent a year earlier to minus 2.64 percent at the end of December 2025.

At the end of 2025, some 42 banks remained compliant with Basel III requirements, together accounting for more than 60 percent of total banking sector assets, according to the report.

It said the overall decline was driven mainly by weak capital positions in Islamic private commercial banks, specialised development banks and several state-owned banks.

Non-performing loans (NPLs), loans on which borrowers have stopped making repayments, were the central pressure point.

At the end of last year, bad loans in the sector stood at Tk 557,217 crore, or 30.60 percent of total loans. By March this year, the amount had risen further to Tk 588,704 crore, or 32.26 percent, according to Bangladesh Bank data.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM) and a former chief economist of the Bangladesh Bank, said the negative capital adequacy ratio pointed to deep structural weaknesses in the sector.

“The latest figures indicate that the sector’s health has deteriorated further compared to previous years. The problems are becoming increasingly severe and harder to resolve,” said Mujeri.

He added that the scale of damage has built up over many years.

“If policymakers want to restore the banking sector to a healthy and sustainable position, there is no alternative to taking strong and decisive corrective measures,” said the former BB economist.

Meanwhile, Mutual Trust Bank CEO Rahman said the current government has taken office at a difficult time, with the financial sector’s weakness adding to its challenges. “Therefore, the government must take the matter seriously. There appears to be no alternative to recapitalisation, but the government itself lacks the necessary funds.”

Recapitalisation refers to the process of injecting fresh capital into banks to restore their financial stability after losses. In practice, it usually involves government support or mergers between weak lenders.

In his budget speech last week, Finance Minister Amir Khosru Mahmud Chowdhury said that the government is spending around Tk 40,000 crore in the current fiscal year to recapitalise weak banks to restore discipline and stability in the banking sector.

He said Tk 20,000 crore of that amount was allocated to Sammilito Islami Bank, formed through the merger of five troubled lenders.

Rahman said broader structural reforms, including bank mergers and other resolution mechanisms, would be needed to stabilise the sector.

He pointed to Greece as an example of a country that faced a similar banking crisis but managed recovery through large-scale recapitalisation backed by the European Union.

Bangladesh, he added, does not have the same fiscal capacity.

Bangladesh’s leather sector is widely recognised as one of the country’s key export industries. Yet beneath this success lies a largely overlooked reality: a significant portion of the industry’s material flow ends up as low-value or hazardous waste despite being rich in recoverable resources such as collagen, proteins, fats, fibres and chromium compounds. Millions of hides processed annually generate tens of thousands of tonnes of tannery solid waste that remains largely underutilised. This waste stream is not merely a disposal burden but a continuous supply of valuable raw materials capable of supporting high-value industries.

In many developed economies, similar by-products are integrated into profitable secondary industries, forming the foundation of circular bioeconomies. In Bangladesh, however, these materials remain fragmented, informally handled and largely excluded from mainstream industrial planning. As a result, opportunities for value addition, import substitution and industrial diversification remain untapped. A key concern is the country’s growing dependence on imported products that could potentially be produced domestically from tannery waste, including collagen peptides, pharmaceutical-grade gelatine, cosmetic ingredients, organic fertilisers and biodiesel feedstocks. This reliance causes a continuous outflow of foreign currency and exposes the economy to external price volatility. At the same time, Bangladesh exports comparatively low-value semi-processed leather. Developing a domestic tannery waste valorisation industry would help substitute imports with local production and strengthen economic self-reliance.

The environmental situation is also becoming increasingly critical. Recent assessments indicate that more than 8.5 million hides and skins processed annually generate around 30,500 tonnes of tannery solid waste, including fleshing, trimmings, chrome shaving dust, buffing dust and leather scraps. With improved environmental compliance and certifications such as Leather Working Group (LWG) approval, tannery utilisation at Savar could rise from 30-40 percent to 90-95 percent. While this would improve export competitiveness, it would also increase waste generation to 60,000-90,000 tonnes a year. This expansion carries major climate implications. Organic tannery waste decomposes under anaerobic conditions in landfills, releasing methane, a greenhouse gas far more potent than carbon dioxide. Without intervention, emissions will increase significantly as production scales up.

Environmental impacts extend beyond greenhouse gases. Leachate from decomposing waste contaminates soil and groundwater, threatening water safety and reducing agricultural productivity. Chromium-containing waste, particularly shaving dust and wet-blue trimmings, poses additional risks through improper handling and unethical use in poultry and fish feed. Open dumping contributes to air pollution, foul odours and public health concerns around industrial zones such as Savar. Despite these challenges, tannery waste presents a strong opportunity for integration into global high-value markets. Demand for bio-based products is expanding rapidly in cosmetics, pharmaceuticals, renewable energy, sustainable materials and agriculture. Collagen-based products alone represent a multi-billion-dollar global industry.

Formal recognition of tannery waste valorisation as an independent industrial sector is therefore essential. At present, it exists without dedicated policy support, industrial classification or investment frameworks. Proper recognition would enable structured development, policy incentives and improved access to financing, strengthening Bangladesh’s transition towards a circular economy. The sector also offers strong potential for private investment across bio-refineries, renewable energy plants, biochemical processing, pharmaceutical and cosmetic intermediates, and organic fertiliser production. With rising global demand for sustainable products, early investment could position Bangladesh as a regional hub for green industrial development. Public-private partnerships, foreign direct investment and technology transfer will be essential.

Ultimately, the future of Bangladesh’s leather industry will depend on whether it continues with a linear production model or transitions to a circular, resource-efficient system.

Bangla QR, Bangladesh’s interoperable quick response (QR) payment collection system introduced by the central bank, expanded to nearly 9.63 lakh merchants by the end of 2025, reinforcing its role in the digital payments ecosystem.

A total of 46 banks, seven mobile financial service (MFS) providers, and four payment service providers (PSPs) now offer the service, according to the Payment Systems Report 2025, published by the Bangladesh Bank (BB) on Monday.

More than Tk 2,700 crore worth of payments were processed through the system last year.

The latest data comes as the central bank seeks to use Bangla QR to achieve 80 percent digital transactions within the next decade and transform the country into a cashless, technologically empowered economy.

In April this year, the BB directed all banks, MFS providers, PSPs and payment system operators (PSOs) to replace proprietary QR codes at merchant points with Bangla QR by June 30, warning of penalties of up to Tk 30 lakh for non-compliance.

A total of 46 banks, seven mobile financial service providers and four payment service providers now offer the Bangla QR service

The central bank launched the interoperable QR-based settlement system in January 2023 to improve transparency, reduce risks, lower transaction costs and accelerate digital payments.

As part of its target of making 75 percent of transactions cashless by 2027, the authorities have already made QR payment facilities mandatory for obtaining or renewing trade licences nationwide.

The platform enables customers of participating banks and MFS providers to make payments using a single QR code, unlike proprietary systems that restrict transactions to specific providers.

According to the report, the payment network reached a major milestone in November last year when banks, PSPs, PSOs and MFS providers began conducting live interoperable transactions for the first time. The development allowed customers to transfer funds to any registered bank account, MFS or PSP wallet, regardless of the service used.

The central bank followed up on this on December 15, 2025, by approving instant settlement for Bangla QR transactions, a move aimed at improving liquidity for small traders.

BB data showed that nearly 66 lakh transactions were conducted through the payment system. However, Bangla QR still accounted for only a small share of transactions routed through the National Payment Switch Bangladesh (NPSB).

The report also showed that the total number of transactions across Bangladesh’s payment system rose 19 percent to 108 crore in 2025, although the overall value of transactions slipped 1 percent.

Alongside Bangla QR, the BB’s national debit card, TakaPay, also gained momentum in 2025. Introduced in November 2023 to reduce reliance on international card networks and lower transaction costs, TakaPay transitioned from magnetic-stripe cards to chip-based debit cards in June 2024, when nine banks first rolled them out. The report said 17 banks are now actively issuing TakaPay cards.

All TakaPay transactions are processed through the NPSB, giving cardholders’ access to around 16,500 ATMs and cash recycler machines, as well as approximately 130,000 point-of-sale terminals nationwide.

“This integration ensures seamless interoperability across participating banks, merchants, and ATMs, allowing cardholders to transact reliably regardless of their issuing institution. By consolidating transaction processing through a unified national switch, TakaPay eliminates fragmentation and establishes a cohesive foundation for digital payments,” the BB said.

The report said Bangladesh had 792,132 credit card users as of December 2025, making credit cards the smallest category of digital payment instruments, well behind the 82.3 lakh debit cardholders and 1.23 crore savings account holders.

The data highlighted a stark urban-rural divide. Cities accounted for 99.41 percent of credit card transaction volume and 92.69 percent of transaction value, leaving rural areas with just 0.59 percent of volume and 7.31 percent of value.

The BB attributed the disparity to structural barriers, including income documentation requirements, limited access to credit bureaus and merchant card-acceptance infrastructure that remains overwhelmingly concentrated in urban areas.

To narrow the gap, the central bank suggested expanding alternative digital credit models, such as transaction-based lending linked to mobile financial services usage, which could broaden access to credit without weakening risk controls.

Despite Bangladesh Bank's campaign to promote a cashless society, cash remains the dominant mode of payment in the country, accounting for 67.2% of total transactions in 2025, according to the central bank's latest annual report.

Data from Bangladesh Bank's payment systems department shows that digital platforms accounted for 32.8% of total transaction value during the year.

The figures, however, indicate gradual progress. In 2024, cash transactions accounted for 72% of total transactions, with the remainder conducted through digital channels.

According to the report, Tk209 lakh crore out of total Tk311 lakh crore was conducted in cash in 2025, while digital mode shared Tk102 lakh crore.

Digital payments include transactions through systems such as Real Time Gross Settlement, National Payment Switch Bangladesh, Bangla QR, internet banking and mobile financial services.

However, cash withdrawals and deposits through bank branches, ATMs or MFS agents are classified as cash transactions because physical money changes hands.

A transaction remains digital only as long as it stays within the digital ecosystem. Once cash is withdrawn or deposited, it is counted as a cash transaction, said a central bank official.

Informal economy remains a major hurdle

Experts say the persistence of cash reflects the size of the informal economy, where a significant transaction remains outside the formal banking system.

Although mobile financial services, digital banking and QR-based payment solutions have expanded rapidly, many businesses and individuals continue to prefer cash for convenience and to avoid greater financial scrutiny.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said, "The country's informal sector remains outside the banking system. A large share of economic transactions takes place there in cash, and we have not yet been able to bring these activities into formal financial channels."

Dr Md Zahid Hussain, former World Bank lead economist in Dhaka, said building a cashless society would remain difficult unless the informal sectors are brought under the formal financial system.

"Large businesses in transport, agriculture, and wholesale-retail trade continue to operate outside banking channels. Many of them are reluctant to join the formal system because doing so would expose them to taxation and regulatory oversight," he said.

Infrastructure, trust challenges

Bankers also point to infrastructure constraints as a major barrier to digital adoption.

Many consumers still lack access to smartphones, reliable internet connections or the digital skills needed to use electronic payment systems. Small merchants and rural businesses often lack the infrastructure required to accept digital payments.

Syed Mahbubur said policy support alone would not be enough to accelerate the shift.

"Digital payment systems must become easier, more accessible and more convenient if we want people to adopt them on a larger scale," he said.

Dr Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, said banks face a dual challenge of ensuring security while making digital services simple enough for users with limited digital literacy.

He warned that fraud incidents, failed transactions and complicated interfaces may erode trust and push users back toward cash.

The banker also stressed the need for an inclusive transition, saying the objective should be to expand consumer choice rather than eliminate cash.

Digital payment adoption remains sluggish even as the country continues to bear the substantial costs of a cash-driven economy. According to banking sector estimates, Bangladesh spends between Tk20,000 crore and Tk22,000 crore annually on printing currency notes.

The first budget under the newly elected BNP government sets ambitious revenue targets that may prove difficult to achieve, given the country’s persistent constraints in tax collection and uneven progress in implementing reforms, according to Fitch Ratings.

In a report today, the ratings agency said the budget for financial year 2026-27 aims to raise the revenue-to-GDP ratio to 10.2 percent from around 8 percent in FY26. If achieved, it would mark Bangladesh’s highest ratio since 1993.
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Fitch said revenue collection would be the main test of the budget’s credibility. The government is targeting 18 percent nominal revenue growth year-on-year while planning to increase spending by 19 percent.

Measures proposed to boost collections include simplifying tax procedures, reducing tax exemptions, easing value-added tax compliance for small and medium-sized enterprises, and increasing non-tax revenue from state investments in state-owned enterprises, corporations and banks.

How the proposed budget reinforces an unequal tax structure
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How the proposed budget reinforces an unequal tax structure

While these initiatives could broaden the tax base over time, Fitch said weak implementation has limited the effectiveness of previous reform efforts.

The pressure to meet revenue targets is heightened by the government’s spending commitments. Social protection and related programmes account for 29.7 percent of total expenditure, while physical infrastructure makes up 18.7 percent, reflecting the government’s election pledges.

However, Bangladesh’s history of underspending could help contain the fiscal deficit if implementation again falls short of budget plans, said Fitch.

The rating agency said measures aimed at the energy sector could support medium-term growth if carried out effectively.

More than 40 percent of the country’s electricity generation capacity is gas-based, and the budget prioritises domestic gas exploration, efficiency improvements across generation and distribution, and stronger infrastructure to support liquefied natural gas supplies.

In the face of a global energy volatility triggered by the war in the Gulf, Bangladesh has requested a new programme from the International Monetary Fund (IMF).

Fitch noted that completing the final review of the current arrangement, which expires in January 2027, appeared unlikely.

It added that reaching agreement on a reform agenda could take time, meaning the credit implications of the FY27 budget would depend largely on whether the government could improve revenue mobilisation and investment execution.

The agency also questioned the government’s growth assumptions.

The authorities expect the economy to expand by 6.5 percent in FY27. Fitch, however, forecasts growth of 3.5 percent, citing continued fragility in the banking sector, weak private-sector credit growth, shortcomings in the policy framework and an uncertain external environment that continues to weigh on investment.

Fitch kept its FY27 fiscal deficit forecast unchanged at 3.6 percent of GDP, matching the government’s target. However, the agency said this reflects expectations of both lower revenue and lower expenditure than projected in the budget.

Fiscal performance in FY26 illustrated that pattern.

The revised deficit estimate for FY26 is reduced to 3.3 percent of GDP from the original 3.6 percent, supported by lower-than-expected spending disbursements. Revised revenue estimates are slightly above the budget target.

Fitch said this reduces the risk of near-term slippage on the headline deficit, but also underlines how difficult it may be to implement the FY27 budget in full.

Over the medium term, the agency said improvements in revenue collection and economic growth would depend on whether the government could deliver reforms more effectively than in the past.

New tax regime may hit middle class hardest
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New tax regime may hit middle class hardest

The authorities aim to raise the revenue-to-GDP ratio to 11 percent by FY30-FY31, increase total investment to 40 percent of GDP and lift foreign direct investment to 2.7 percent of GDP. These measures are intended to boost real GDP growth to 8.5 percent while bringing inflation down to 5 percent.

The budget includes several initiatives intended to support investment and export growth.

The government has reduced withholding tax on machinery rental payments to non-residents to 7.5 percent from 15 percent, highlighted bridge and expressway projects, and continued to promote public-private partnership initiatives.

It has also retained the 2.5 percent cash incentive for remittances sent through formal channels and extended duty-free import facilities and bank guarantees for raw materials and intermediate goods to encourage export diversification beyond the ready-made garment sector.

The Dhaka Stock Exchange ended lower today (16 June), snapping a three-day winning streak as investors moved to lock in profits following a strong post-budget rally that had pushed the benchmark index above the 5,600-point mark.

The benchmark DSEX index of the premier bourse plunged by 35 points, or 0.62%, to close at 5,605, reflecting a cautious shift in investor sentiment after three consecutive sessions of robust gains.

Market analysts observed that while there was selective bargain hunting in attractively valued scrips, it proved insufficient to counter the broad-based selling pressure that intensified as the session progressed.

The blue-chip segment also faced a sharp correction, with the DS30 index slipping by 17 points to settle at 2,110.

Trading activity saw a noticeable contraction, with total turnover on the DSE dropping by 18% to Tk1,196 crore, compared to the previous day's Tk1,456 crore.

According to EBL Securities' daily market review, the market remained volatile throughout the day as participants remained active on both sides of the trading fence.

However, significant corrections in influential large-cap stocks eventually weighed down the indices, pulling the bourse into negative territory by the closing bell.

Sheltech Brokerage noted in its daily report that the market movement was primarily shaped by profit-taking after the recent advance. While the session opened with modest buying interest and several recovery attempts, selling pressure gradually became dominant through the mid-session.

It added that the volatility reflected a selective and cautious approach among investors, many of whom appear to be waiting for clearer signs of market stability before committing to large-scale fresh investments.

The market breadth remained bearish, with 240 issues declining against only 109 advancing, while 47 scrips remained unchanged on the DSE floor.

On the sectoral front, the textile sector emerged as the turnover leader, accounting for 19.4% of the day's total volume. This was followed by the banking sector at 12.4% and the general insurance sector at 11.7%.

In terms of returns, the miscellaneous sector faced the steepest decline of 4.1%, driven largely by a heavy sell-off in specific large-cap scrips. The banking and paper sectors also saw significant corrections of 1.5% and 1.4%, respectively.

In contrast, the services sector provided a rare bright spot with a 1.6% gain, while the textile and mutual fund sectors also managed to post marginal positive returns.

Among individual stocks, ICB Employees Provident Mutual Fund topped the gainers' list with a 10% price surge, followed by National Feed Mill, VFS Thread, and BD Thai Aluminium.

In terms of liquidity, Summit Alliance Port was the most traded stock with a turnover of Tk63.20 crore, followed by NCC Bank and IPDC Finance.

On the losing end, Beximco Limited hit the lower circuit breaker, shedding 9.98% of its value, while Midas Finance and Sunlife Insurance also featured among the top losers of the day.

The bearish sentiment was mirrored at the Chittagong Stock Exchange (CSE), where the Selective Categories' Index (CSCX) ended 83 points lower at 9,340.

The broad CASPI index at the port city bourse dropped by 123 points to settle at 15,271, while turnover declined by 27% to stand at Tk31 crore.

The Executive Committee of the National Economic Council (ECNEC) today approved five projects involving an estimated cost of BDT 70.03 billion.

Of the total project cost, BDT 45.36 billion will come from the government's own resources, while BDT 24.67 billion will be financed through project loans.

The approval came from the 13th ECNEC meeting of the current fiscal year (FY26) held at the Cabinet Division conference room at the Bangladesh Secretariat, with ECNEC Chairperson and Prime Minister Tarique Rahman in the chair.

Among the approved projects, three are new, while two are revised schemes.

The approved projects include one project under the Prime Minister's Office titled “Supporting Infrastructure Project for Chinese Economic and Industrial Zone”.

Three projects under the water resources ministry were also approved. These are: Rehabilitation of Muhuri-Kahua Flood Control, Drainage and Irrigation Project in Feni District (Phase-I); Karatoya River System Development Project, and the first revised project for protecting Talbaria area under Mirpur upazila and Komorkandi area of Shilaidaha Union under Kumarkhali upazila in Kushtia district from erosion by the Padma River.

In addition, ECNEC approved the third revised project titled “Establishment of One Technical School and College in Each of 100 Upazilas”.

The project is being implemented under the education ministry.

The meeting was also informed about four projects involving costs below BDT 500 million that had already been approved by the planning minister.

These projects are: construction of an Airmen Barrack Complex at Bangladesh Air Force Base Cox's Bazar; establishment of Navy School and College at Savar; construction of physical infrastructure for improving educational standards and teaching capacity at BAF Shaheen College under Bangladesh Air Force Station Shamshernagar; and the fourth phase of the Pagoda-based Pre-primary and Tripitaka Education Programme.

The meeting was attended by Finance and Planning Minister Amir Khosru Mahmud Chowdhury; LGRD and Cooperatives Minister Mirza Fakhrul Islam Alamgir; Foreign Minister Dr Khalilur Rahman; Industries, Textiles and Commerce Minister Khandakar Abdul Muktadir; Road Transport, Bridges, Railways and Shipping Minister Shaikh Rabiul Alam; Home Minister Salahuddin Ahmed; Education and Primary and Mass Education Minister Dr A N M Ehsanul Hoque Milon; Water Resources Minister Md Shahiduddin Chowdhury Anee; State Minister for Planning Zonayed Abdur Rahim Saki and senior government officials.

QatarEnergy is ready to resume liquefied natural gas production ​at its Ras Laffan LNG plant very quickly ‌and could reach within a month full output of facilities unaffected by Iranian strikes, a person with knowledge of the matter told Reuters ​on Tuesday (16 June).

Two of Qatar's 14 LNG trains and ​one of its two gas-to-liquids (GTL) facilities were damaged in ⁠the strikes, which knocked out 17% of the country's ​LNG export capacity, and will take years to repair, the ​group's CEO told Reuters in March.

However, production at other facilities, idled because of the de facto closure of the Strait of Hormuz oil ​and LNG export gateway for the region during the Iran ​war, could be quickly restored, the source said.

"The problem will be how ‌fast ⁠can we bring ships in and how fast we can load them after the strait opens," the person, who declined to be named, told Reuters. "It's more of a shipping ​and logistics problem ​than production."

Despite ⁠a framework agreement between the US and Iran on terms to end their war and reopen ​Hormuz, a little more than a dozen LNG ​tankers ⁠have managed to exit the strait since the war began in late February.

Shippers are awaiting reassurance on safety to cross the ⁠strait, ​including the clearing of mines, which ​could delay a return to normal shipping traffic by weeks.

Bangladesh's first budget by the newly elected government sets "ambitious" revenue targets that may prove difficult to achieve given the country's weak track record in tax mobilisation and reform implementation.

Such is the just-presented budget's ratings coming from the New York-based outfit Fitch Ratings.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury last Thursday rolled out his maiden budget in parliament for next fiscal year beginning July 01. The budget size is Tk 9.38 trillion and the revenue target set at highest-ever Tk 6.95 trillionPersonal finance e-book

The revenue-to-GDP ratio is 10.2 per cent, up from around 8.0 per cent in the outgoing financial year (FY2025-26), also the highest level since 1993.

"Revenue collection will be the main test of fiscal performance, as the budget projects nominal revenue growth of 18 per cent year on year alongside a 19-percent increase in public spending," says Fitch in its latest analysis on Bangladesh budget.

It mentions that to boost revenue, the government has proposed simplified tax procedures, a reduction in tax exemptions, easier VAT compliance for small and midsize enterprises (SMEs), and higher non-tax income from state investments in state-owned enterprises, corporations and banks.

While these measures could gradually broaden the tax base, Fitch says, weak implementation has limited the effectiveness of past reform efforts.

The global ratings agency notes that higher spending commitments make successful revenue mobilisation even more important. Social protection-and welfare programmes account for 29.7 per cent of total expenditure, while physical infrastructure receives 18.7 per cent, reflecting the new government's election pledges.Bangladesh economic report

However, as a saving grace, Bangladesh's longstanding tendency to underspend budget allocations could help contain the fiscal deficit if implementation again falls short of targets.

Fitch says energy-sector initiatives outlined in the budget could support medium-term economic growth if effectively implemented.

More than 40 per cent of the country's power-generation capacity is gas-based, and the budget prioritises domestic gas exploration, efficiency improvements in generation, transmission and distribution, and enhanced infrastructure for liquefied natural gas (LNG) imports.

The agency also says that Bangladesh has sought a new programme from the International Monetary Fund (IMF), while completion of the final review under the current arrangement, which expires in January 2027, appears increasingly unlikely. Any agreement on a new reform agenda could take time, leaving the budget's credit implications largely dependent on the government's ability to improve revenue mobilisation and investment execution.

Fitch also questions the government-set growth assumptions.

The authorities expect real GDP growth of 6.5 per cent in FY27, compared with Fitch's forecast of 3.5 per cent.

The agency cites a still-fragile banking sector, weak private-sector credit growth, policy shortcomings and an uncertain external environment as key factors continuing to weigh on investment and economic activity.

Offshore-banking operations face setbacks following regulatory instructions downsizing the cost-ceiling rate on foreign-currency lending to businesses that dents profitability of commercial banks and may ultimately affect the economy.

As the spread on foreign-currency loans squeezes under the current macroeconomic sluggishness, some of the banks decide to lessen their concentration on offshore-banking operations, with the risk of disruption to trade financing and increase in pressure on the economy, according to the market players.Personal finance e-book

The Foreign Exchange Policy Department-1 (FEPD-1) of Bangladesh Bank earlier on May 11 issued a circular lowering the all-in-cost ceiling on short-term trade finance to the benchmark rate plus 3.0 per cent from 4.0 per cent.

Under the revised rule, the borrowing cost for short-term permissible trade finance in foreign currencies will be capped at a maximum of 3.0 per cent per annum over benchmark rates, including SOFR (Secured Overnight Financing Rate) and Euribor,

All in costs includes interest, commissions, fees and other charges associated with such trade and term financing in foreign currency.

Seeking anonymity, a BB official says, the central bank issued the latest instruction aiming to bring borrowing costs in line with global market trends.

He says many of the commercial banks can borrow foreign currency from the correspondent banks at rates in-between 2.20 per cent and 2.50 per cent per annum over the benchmark rates. "So, the spread (0.80 per cent to 0.50 per cent) is still lucrative as far as businesses concerned. But we want to reduce the import costs," the central banker adds.

According to market insiders, the market size of offshore banking operations is around $6.0 billion. By end of 2025, the major market players were BRAC Bank ($877 million), Prime Bank ($608 million), Pubali Bank ($464 million), Eastern Bank ($436 million), City Bank ($427 million) and Bank Asia ($238 million).

Shortly after the issuance of the circular by the banking regulator, the Association of Bankers, Bangladesh (ABB) requested the central bank to reconsider the recently revised all-in-cost ceiling for short-term import- trade finance in foreign exchange, warning that the new pricing framework could disrupt trade financing and increase pressure on the country's economy.Market trend analysis

In a letter to BB Governor Mostaqur Rahman, the ABB expressed concerns over the circular which fixed the ceiling for short-term import-trade finance at the benchmark rate plus 3.0 per cent per annum.

According to the apex body of the country's top commercial bank executives, commercial banks are heavily dependent on offshore borrowings and interbank foreign-currency markets because of the country's limited foreign-currency deposit base.

The prevailing market conditions and sovereign-risk premium have pushed the cost of foreign- currency funding close to the newly imposed ceiling, leaving little room for banks to operate profitably, the bankers argue.

Currently, well-rated private commercial banks secure short-term trade base financing in foreign currency lines at approximately SOFR+2.75 per cent. Once statutory costs are incorporated, the effective all-in cost rises to approximately SOFR+3.00 per cent for the banks.

Additionally, the funding cost exceeds SOFR+3.00 per cent in securing long-term funding, when upfront-arrangement fees on term facilities are amortized.

"In practice, the entirety of funds from long-term borrowing may not be exactly matched with long-term lending book. Banks often have to utilize these funds for short-term financing as well," the letter reads.Regional business directory

Unfortunately, banks face challenges to negotiate expected price with foreign counterparties at current country rating. With the imposed revised pricing level, the banks may face new challenges. It may result in banks not being able to adequately facilitate short-term financing needs of customers,

To address the issue, the ABB proposes two alternatives. The first recommendation calls for a phased reduction in the ceiling over a transition period, allowing banks sufficient time to adjust their funding structures and complete ongoing negotiations. The second proposal suggests setting the ceiling at benchmark rate plus 3.50 per cent and deferring its implementation by at least six months.

On condition of not being quoted by name, the offshore banking head of a private commercial bank says only three to four banks can make profit in doing offshore-banking business after the sharp reduction in the ceiling but majority will not be able to sustain.

"In fact, our bank decides to lessen concentration on the business as it will not be viable for us under the current circumstances," he told The financial Express.

Managing Director and Chief Executive Officer of Mutual Trust Bank (MTB) Syed Mahbubur Rahman says the 1.0-percentage-point reduction in the ceiling will certainly hit profitability in banks at a time when the space of making profit keeps squeezing due to prolonged economic sluggishness.Personal finance e-book

He says there are many banks that may lose interest as they will not be able to make some gains in offshore-banking business. "So, the income that the local banks can book would go outside and it will put more pressure on local currency," the experienced banker alerts.

ABB Chairman Mashrur Arefin says they have already sent a letter explaining the market situation to the central bank governor to reconsider the matter.

"We'll soon meet the BB governor with this serious issue," informs Mr. Arefin, also Managing Director and Chief Executive Officer of City Bank PLC.

Bangladesh could attract up to $100 million in investment through a proposed Orange Climate Fund as policymakers, investors and market leaders push for the development of a stronger, inclusive financial ecosystem to support sustainable and climate-resilient economic growth.

The investment prospect emerged at the Orange Economy Summit 2026 held in the capital on Tuesday, where stakeholders highlighted the growing role of innovative financing instruments and impact investment in mobilising long-term capital for Bangladesh's development priorities.

The summit, jointly organised by the Dhaka Stock Exchange (DSE), Impact Investment Exchange (IIX) and the Policy Research Institute of Bangladesh (PRI), focused on building Bangladesh's Orange Capital Ecosystem, expanding inclusive finance and attracting global capital to support the country's economic transformation, according to a press release.

Bangladesh Bank Deputy Governor Dr Md Habibur Rahman attended the event as chief guest. Senior government officials, regulators, representatives from financial institutions, corporate entities, development partners and international experts also participated.

Speaking at the summit, IIX Founder and Chief Executive Officer Professor Durreen Shahnaz said Bangladesh has been identified as a priority market under IIX's proposed $1 billion Orange Climate Fund, with plans to channel $100 million into the country.Market trend analysis

Bangladesh's graduation from least-developed country (LDC) status and its ambition to become a trillion-dollar economy would require a stronger and more inclusive financial market capable of attracting long-term investment, she said.

"Bangladesh has immense opportunities in sectors such as ready-made garments, agriculture, renewable energy and financial services," she said, adding that deepening the capital market is critical to unlocking these opportunities.

She described the Orange Movement as a global initiative aimed at building inclusive capital markets and mobilising $10 billion by 2030 through innovative financing structures that combine financial returns with measurable social and environmental impact.

Prof Shahnaz said IIX has facilitated more than $18 million in investments in Bangladesh over the past decade and supported the issuance of the country's first Orange Bond.

In his welcome remarks, DSE Managing Director Nuzhat Anwar said sustainable development requires a balance between economic growth, social inclusion and climate resilience.

She said the stock exchange remains committed to promoting sustainable finance, strengthening corporate governance and aligning with international standards.

Presenting a keynote paper, PRI Chief Economist Dr M Ashiqur Rahman said Bangladesh faces significant challenges in employment generation, climate adaptation and productivity enhancement as it moves towards becoming a trillion-dollar economy.Personal finance e-book

He observed that structural constraints in banking, capital markets, bond markets and venture capital financing continue to limit the availability of long-term funding for productive sectors.

Against this backdrop, he argued that orange capital could serve as an innovative financing framework capable of directing investment toward sectors that generate economic, social and environmental benefits simultaneously

Deputy Governor Dr Habibur Rahman said Bangladesh Bank has undertaken various initiatives to strengthen financial inclusion and women's economic empowerment.

Dr Rahman reaffirmed the central bank's support for efforts to attract orange investments and underscored the importance of positioning Bangladesh as a preferred destination for sustainable and impact-oriented capital.

Referring to the country's first Orange Zero-Coupon Bond issued through Sajida Foundation, he described the initiative as a landmark achievement for Bangladesh's capital market and a significant step toward developing a broader impact-investment ecosystem.

Berger Paints Bangladesh Limited has recommended a 525% cash dividend for the financial year ended 31 March 2026, subject to shareholder approval.

The proposed dividend means shareholders will receive Tk52.50 per ordinary share of Tk10.

The recommendation was approved at a meeting of the company's board of directors today (15 June), alongside the audited financial statements for the year.

According to the financial statements, Berger Paints posted a consolidated net profit of Tk372 crore during the financial year. Its consolidated earnings per share (EPS) stood at Tk76.83.

The company has scheduled its Annual General Meeting (AGM) for 24 August to seek shareholder approval for the dividend and the audited financial statements.

The record date has been fixed for 7 July. Shareholders whose names appear in the company's records on that date will be eligible for the dividend and entitled to participate in the AGM.

Acting managing director of Islami Bank Md Altaf Hossain has said the bank received another Tk2,500 crore in liquidity support from the central bank today (15 June).

"We also received Tk2,500 crore in liquidity support from Bangladesh Bank yesterday. We have not yet had to use the funds received yesterday," he told reporters.

Altaf said he hopes that customers who have withdrawn their deposits will regain confidence in the bank and return.

The acting chief said the bank is already seeing signs of improving customer confidence.

"We have just received information from one of the bank's major branches showing that the number of account closures has fallen by 75% compared to previous levels," he said.

Bangladesh Bank yesterday dissolved the board of Islami Bank Bangladesh, including Chairman Md Khurshid Alam, as the bank grappled with an acute liquidity crisis fuelled by deposit flight and growing uncertainty among customers.

To stabilise the situation, the regulator appointed its executive director, Mohammad Zahir Hussain, as administrator of the country's largest shariah-based bank.

A group of Islami Bank customers today welcomed the decision to dissolve the bank's board of directors, urging the central bank to swiftly appoint a new board comprising competent, credible and politically neutral individuals.

Under the banner of the "Islami Bank Sachetan Grahok Forum," they congratulated Bangladesh Bank on the move and called for the restoration of sound governance at the bank.

They also urged the regulator to reconstitute the board with experienced individuals who were involved in the bank's management before its takeover by the S Alam Group, saying that such a move will help rebuild depositor confidence and strengthen the institution's governance framework.

Newly appointed Islami Bank administrator Zahir said today that efforts are underway to form a "completely neutral" board to strengthen governance and restore depositor confidence.

Speaking after assuming charge, he said his appointment is for a limited period and assured customers that banking operations and transactions will continue uninterrupted, urging them to carry on their banking activities without concern.

The crisis emerged quickly after Bangladesh Bank appointed former deputy governor Khurshid Alam as chairman of Islami Bank on 24 May, just hours after the previous chairman stepped down and immediately before the start of a week-long Eid-ul-Adha holiday.

The move raised swift concerns among stakeholders.

Following the holidays, protests broke out on 1 June outside the bank's Motijheel head office in Dhaka, where demonstrators under the banner of the Islami Bank Sachetan Grahok Forum demanded cancellation of Khurshid's appointment.

Bangladeshi exporters will now be able to showcase their products on globally recognised online marketplaces such as Alibaba and Amazon after Bangladesh Bank eased foreign exchange regulations to facilitate business-to-consumer (B2C) exports.

The central bank issued a circular today (15 June) allowing exporters to list and display goods on international e-commerce platforms accessible to foreign buyers, aiming to expand digital export opportunities and simplify cross-border trade.

Under the new guidelines, exporters can use platforms including Alibaba, AliExpress and Amazon to reach global customers, subject to compliance with payment and regulatory requirements.

According to the circular, authorised dealer (AD) banks must verify that exporters have valid merchant or participation agreements with recognised online marketplaces, including arrangements for payment settlement and dispute resolution.

The facility will apply only to small-value exports on Cost and Freight (CFR) terms, with each transaction capped at $5,000 or its equivalent.

For documentation, transport, or shipping papers may be issued in the name of foreign buyers. The EXP form requirement will be waived for shipments up to $1,000 per consignment, provided export proceeds are received in advance through banking channels or legitimate digital payment systems. For all other shipments, existing EXP form procedures will apply.

Bangladesh Bank said export proceeds must be repatriated by online marketplaces, platforms or overseas buyers through formal banking channels or approved digital payment systems within the prescribed timeframe from the date of shipment.

The circular also stated that fees, commissions and other charges payable to online marketplaces must remain within the limits set by the regulations. Officials said the move is intended to support small exporters and integrate Bangladesh more closely into global digital trade networks.

Oil prices slipped to a three-month low on Monday after US President Donald Trump and Iran’s deputy foreign minister said they had reached an initial deal to end the war and to resume traffic through the Strait of Hormuz.

Brent crude futures fell $3.65, or 4.2 percent, to $83.68 a barrel by 0630 GMT and US West Texas Intermediate was at $80.75, down $4.13, or 4.9 percent. Both contracts fell to their lowest levels since March 10 on Monday after tumbling more than 3 percent on Friday.

The US and Iran will sign a memorandum of understanding in Switzerland on Friday, said the prime minister of Pakistan, whose country has served as a mediator.

Trump said on Sunday that the Strait of Hormuz would be open “toll free” and that a US naval blockade of Iranian ports would also end. Iran’s semi-official Mehr news agency said the draft deal called for reopening the Strait of Hormuz within 30 days under Iranian arrangements.

“The geopolitical risk premium that had been built into crude is now being unwound quite aggressively as traders price in the prospect of restored oil flows,” said Tim Waterer, chief market analyst at KCM Trade.

The world has lost millions of barrels of oil and gas supply since the war closed the Strait of Hormuz, a chokepoint for a fifth of the world’s oil and liquefied natural gas supplies, for more than three months. Investors are also watching cautiously how quickly Middle Eastern producers can resume oil production and exports following damage from the war and whether more ships will enter the region.

“While these uncertainties suggest upside risks to our forecast for Brent oil futures to reach $80/bbl by the end of the year, it’s worth noting that oil flows through the Strait of Hormuz just needs to reach 60-70 percent of pre-war levels to return oil markets to pre-war oversupply expectations,” Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia, said in a note.

Iran’s deputy foreign minister, Kazem Gharibabadi, said a more expansive agreement would be negotiated during a 60-day ceasefire period.

E4 nations, which include the UK, France, Germany and Italy, said on Sunday the countries were prepared to lift sanctions on Iran in response to steps on its nuclear programme.

“Beyond the immediate price reaction, attention will now shift toward the pace of actual supply normalization and compliance with the agreement,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. “While the conflict may have come to an end and oil flows through the Strait of Hormuz may gradually return to normal, the damage already done cannot be reversed overnight. This includes not only any physical damage to oil infrastructure but also the economic strain endured by oil importing economies that have faced elevated energy costs for months.”