As the prime banking regulator, Bangladesh Bank should reconsider this directive. At the bare minimum, it can remove SME loans from it, just like consumer loans were omitted. Ideally, scrapping the regulation altogether and replacing it with a policy rate cut would be a better way to bring down lending rates.
The Monetary Policy Statement was announced in the last week of June, and was almost immediately hemmed in by the circular announcing the spread cap -- a sequencing that signals incoherence. And that incoherence matters more than the actual policy. Macroeconomic policy cannot be effective in supporting growth or curbing inflation unless it is credible.
Liquidity is a necessary condition for industrial revival, but it is not sufficient.
Injecting fresh credit into such entities risks creating 'zombie firms' -- businesses that survive on subsidized finance but fail to generate sustainable returns.
In structural terms, the policy reflects an ongoing evolution in Bangladesh’s financial regulatory framework -- from rigid quantitative controls toward more dynamic, risk-sensitive calibration.
The workers did their job. Now the state needs to do its part. Our remittances are as big as our garments. So why does one get a ministry and the other get a circular?
This second article in a three-part series argues that bad loans, political patronage, and cosmetic accounting turned Bangladesh’s banks into a public crisis.
There is no better way for the ruling party to signal that it understands this new reality and that recognizes that it is truly a new day in Bangladesh, and that they too have changed their spots accordingly, than for them to quietly walk back the appointment.
Bangladesh is not on the verge of collapse, but it remains fragile. During periods of economic uncertainty, central banks must stay above politics. When monetary authority appears negotiable, inflation expectations shift, currency stability drops, and fiscal discipline weakens.
This government came to power with a democratic mandate. But it risks squandering it. City administrations must look neutral. International crimes prosecutions must feel independent. And the central bank must signal credibility beyond politics.
When it comes to the central bank governor, optics are everything. If he is perceived to be the government's man, then no one will have the necessary faith in him, and he will fail before he even starts.
Keeping interest rates artificially low is a recipe for disaster. We have been here before -- not even too long ago -- and we know how this story ends. It won't be pleasant for anyone, least of all the newly-elected government.
An independent central bank could have prevented bank fraud and inflation. There is no alternative unless we want to return to the bad old days of high inflation and a plummeting Taka.
A country aspiring to become a trillion dollar economy cannot afford to operate with manual, subjective, or personality-driven oversight. It needs strong institutions delivering predictable outcomes.
Without urgent steps to make Bangladesh Bank truly autonomous and accountable, meaningful economic reform will remain incomplete.
