What Bangladesh Bank intends to do with banking sector crisis?

After the July-August Revolutions, last seven months wasn't very pleasant experience for the banking and business sector. Due to huge credit loss, NPL (nonperforming loans), liquidity crisis - the clients lost their trust on banking sector. And at the same time inflation has been the biggest issue for this country for a long time. Awami League government is gone for seven months, but still there are some political instabilities and uncertainties, that are preventing investments. Since there is less investments and business projects, unemployment is going to be a big issue.

The first step we've seen that Bangladesh Bank increased the Policy Rate. This is the most common step for Central Bank to increase the interest rate to control inflation by encouraging more deposits and investments. The root cause of inflation in Bangladesh was not necessary the money supply - business syndicate, corruption and import costs always played a vital role for price hikes. Rise of Policy Rate is one tool, but not necessary the ultimate solution. 

At the same time the IMF installment was also declined, since there were conditions like higher VAT charge, floating currency exchange rate - which might increase the cost of production, as well as the price index. 

This interim government and Bangladesh Bank are reluctant to increase the price level any means necessary.  

The inflation rate has come down to single digit, which is a good sign. 

Now the focus is on collecting deposits. Trust issue of depositors is a big deal, and on the conference of 4th March, 2025 - Governor Dr. Ahsan H. Monsur prioritized on gaining clients trust and collecting deposits to Leading Bank's Leaders. He also assured that his team is working on strengthening Bangladesh Bank authorities to have better control in banking industry.

And Bangladesh Bank also reduced the Cash Reserve Ratio to 3% from 3.5%, to encourage commercial banks more on lending as well. 

Businessmen are demanding to reduce interest rate, but Governor declined that request and asked them to wait until inflation is in control.

So, what we can assume that, to have business growth we need to wait a little bit. First the purchasing power of mass consumer level will be secured, banks will gain client's trust and deposits - then the interest rate will be lowered, and businessmen demand's will be fulfilled.