Bangladesh’s banking industry is grappling with instability due to a rising number of non-performing loans and liquidity shortages. In 2022, 11 banks experienced a collective shortfall of $3.1 billion, adding to the banking sector’s existing woes. The recent proposals for bank mergers have only heightened concerns about the stability of the industry, raising fears of a potential crisis of confidence that could spill over into the broader financial system.
These developments have also contributed to a slowdown in industrial output growth, which has declined by 3.7% in 2023-24. Private investment remains stagnant at around 20% of GDP due to tight liquidity, rising interest rates, and import restrictions on essential inputs. Bangladesh’s over-reliance on the readymade garment (RMG) sector further exacerbates the risks. The sector accounts for 10% of GDP and 85% of exports, making economic diversification an urgent priority
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