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Dhaka Tribune

Our banking sector’s withdrawal symptoms

There is no denying that the banking sector, in its current state, is still incredibly volatile

Update : 10 Mar 2024, 12:39 PM

A healthy banking sector is crucial to the overall development of any nation, especially one with ambitious medium-to-long term goals as Bangladesh. While the current stagnancy our economy is undergoing can be attributed to multiple factors working in tandem, our ailing banking sector is one of the more prominent ones.

Which is why renowned American rating agency Moody’s recent shift in outlook for Bangladesh’s banking sector from “negative” to “stable” comes as some much needed relief, especially given the doom and gloom which has surrounded this troubled sector both nationally and globally.

The change in outlook has been stoked primarily by the numerous measures our banking sector had to adopt in order to reform itself in line with the conditions set by the International Monetary Fund and its$4.7 billion loan program. Given Moody’s shift in outlook, it is fair to assume that the reforms are indeed working as they were expected to.

Last year, the central bank’s Financial Stability Report 2022 painted a dire picture for our banking sector, and further prompted economists and banking professionals to question the efficacy of the sector’s policies back then. It gravely underscored the necessity for even more transparent reporting and stringent oversight so that the continued health and stability of Bangladesh's banking industry can be ensured.

Despite the positive shift in outlook, there is no denying that the banking sector, in its current state, is still incredibly volatile. While the changes spurred by the IMF’s loan conditions are absolutely welcome, this should be considered a sign for even greater change to be introduced into this incredibly important arm of our economy.

From punishing bad borrowers, to the consolidation of weaker banks, there are far too many holes in our banking sector as things stand.

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