Analysts and banking sector stakeholders on Saturday called for loans disbursed through fraud and irregularities to be classified separately from conventional non-performing loans (NPLs), arguing that such a move could ease reported default pressure and help stabilise the ailing banking system.
The proposal came at a seminar titled “Banking Sector Crisis: Islamic Banking Context, Its Impact on the National Economy and the Way Forward,” organised by the Bank Customers Forum at the CIRDAP auditorium in the capital.
Speakers said widespread irregularities and alleged looting have pushed the banking sector into a deep crisis, eroding depositor confidence, constraining investment and amplifying risks to the broader economy.
Former caretaker government adviser and Chairman of BRAC, Dr Hossain Zillur Rahman, described the proposal as an “innovative step” that could reduce headline default figures and give struggling banks room to recover. He warned that failure to resolve the banking crisis could trigger wider economic instability.
Echoing the view, Faruk Mainuddin Ahmed, vice chairman of BRAC Bank, said loans created through outright plunder should not be treated as standard defaults.
He said excluding such loans from regular classifications could significantly lower NPL ratios and improve banks’ operational capacity. Islamic banks, he added, were particularly targeted due to relatively flexible lending structures.
Faruk Mainuddin also noted that Bangladesh’s legal framework on default loans remains relatively recent and still contains loopholes, unlike countries such as India, which introduced relevant legislation decades earlier.
Seminar chair Abul Kashem Haider, a former vice-president of the FBCCI, alleged that large-scale plundering has taken place in both public and private banks over the past 15 years.
He said although the government has taken some initiatives, visible progress in tackling the crisis remains limited. He also claimed that funds siphoned from banks have been used to build assets abroad, contributing to a slowdown in domestic investment and factory closures.
In his keynote, researcher Md Mizanur Rahman traced the gradual erosion of governance in the banking sector across four generations of banks.
He said political influence, risky lending, family dominance and weak oversight have led to rising defaults, liquidity stress, capital flight and declining public trust. Islamic banks, he added, have also been affected by increasing control and irregularities.
Speakers stressed the need for exemplary punishment for those involved in banking irregularities. Some even proposed publicly identifying offenders — including displaying their images in museums — as a deterrent.
Hossain Zillur Rahman questioned recent legal provisions that could allow individuals linked to past irregularities to re-enter the system. He also emphasised the need to ensure the autonomy of the Bangladesh Bank to rebuild confidence.
Badiul Alam Majumdar, secretary of the Shushashoner Jonno Nagorik (SUJON), said the banking sector — a key driver of the economy — has been severely undermined by large-scale irregularities.
He noted that many depositors are now struggling to withdraw funds, reflecting a deepening trust deficit.
Participants, including clients of Islami Bank Bangladesh Limited and Social Islami Bank Limited, alleged that some banks were effectively taken over through politically driven decisions.
They also raised concerns over regulatory weaknesses, noting that controlling stakes could be influenced with minimal shareholdings, and questioned the role of oversight bodies.
Speakers warned that without decisive reforms, stronger regulation and visible accountability, restoring confidence in the banking sector and ensuring economic stability will remain a major challenge.