Challenges for the Banking sector of Bangladesh

" The banking sector is currently facing big challenges of inflation and unstable
foreign exchange rate in the post COVID-19 period. "- Fazle Kabir, Governor of
Bangladesh Bank
The banking sector is crucial for a healthy economy, especially in developing
countries like Bangladesh. Disruptions can negatively impact the economy, and
the soundness of the banking system is closely related to the health of the
economy.

Major Challenges Faced by Bangladeshi Banking Industry:

The banking sector has faced criticism for rising non-performing loans, poor
governance, political influence, money laundering, and malpractices, with
scandals like Hallmark, Crescent Group, AnonTex Group, and Bangladesh Bank
cyber heist.

Major challenges faced by Bangladeshi Banking sectors are as follows:

1. Low quality of asset: Banks utilize their main assets as investments, including
reserves, cash items in collection, deposits at other banks, securities, and loans.

2. Lack of good governance, accountability and transparency: Lack of good

governance in the banking sector negatively impacts financial soundness
indicators like asset quality, capital adequacy ratio, liquidity, and earning capacity.

3. Non- Performing Loans(NPL): NPL is one of the prime concerns that harms the
financial health and stability of the lbanks.
4. Inadequacy of effective risk management system
5. A Cultural Shift
6. Regulatory Compliance
7. Changing BusExpectations
8. Rising Expectations

Macro Risks: Besides these major problems faced by our banking industry,
some other macro issues related to our banking sector:
1. Industrial Loan
The growth rate in the industrial term loans has been fluctuating with an irregular
movement and growth rate was also negative.
2. Agricultural Credit Disbursement
The growth rate of agricultural credit disbursement and the recovery of credit
have
been declining.
3. Government Borrowing from the bank
Government borrows to finance the budget from the banking system consists of
borrowing from the central bank and scheduled banks.
4. Credit Growth.
5. Surplus Liquidity
6. Huge amount of unbanked population
7. Lack of cyber security and risk management
8. Absence of law implementation

Challenges and Constraints of E-Banking:

Still e-banking of Bangladesh faces major constrains which are describes bellow:
1. Infrastructural barriers :Our country faces challenges in telecommunication
services, communication bandwidth, software availability, and costly hardware for
ATM booth establishment.
2. 2. Knowledge Barriers
Mass awareness is not feasible. There was lack of technological knowledge among
the managers, employees, and customers of bank.
3. Legal and Security Barriers
4. Socio-cultural and Economic Barriers
5. Limited Number of Online Customer Due to High Cost

Some strategies to address future challenges:

1. Attract and retain clients of Banks and financial services
2. Knowing customer in a rapidly changing world
3. Promote confidence in the economy
4. Using technology that customers expect
5. E-banking services may be standardized so that wherever the solution is used
the customer is familiar with the procedure followed.
6. Provide adequate training and technological support to develop the manpower.
7. Proper infrastructure development.
8. Appropriate legal framework

Forming a Free and fair Banking Commission is essential to save the banking
industry of Bangladesh”- The Centre for Policy Dialogue (CPD)
Bangladesh's banking sectors are facing critical challenges, necessitating robust,
resilient systems. State policymakers, Central Bank, and stakeholders must take
proactive, timely, and corrective steps to minimize financial system threats.
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