India, the world’s most populous country, has 33 domestic commercial banks. Bangladesh has 52 in the same category. Over the past two decades, India has reduced its bank count by at least 40 through consolidation and acquisition. The number of public sector banks has contracted from 27 to just 12. Private banks number 21. This pruning, coupled with stricter corporate governance, has fortified India’s banking sector. Non-performing loans have fallen to roughly 2 percent.
Bangladesh, by contrast, has moved in the opposite direction. Its non-performing loan ratio now exceeds 30 percent. Of the nine state-owned banks, eight are in acute distress. Capital and provision shortfalls have pushed them into deep crisis. Many private banks are similarly brittle.
Observers regard the sheer number of banks in Bangladesh as a structural vulnerability. Economists and bankers argue that the country readily adopts India’s negative traits but shuns its constructive policies. India’s banking sector over the past two decades has tracked a steady course of improved governance and prosperity. Bangladesh’s banking sector on the other hand has steadily weakened. Alongside proliferation, it has suffered chronic irregularities, corruption and outright plunder. The previous interim government did attempt to merge several ailing private banks but left the process in a parlous state. It ignored reforming the state banks entirely. The newly elected government, they suggest, could now adopt the Indian model to repair the banking sector.
Economist Dr Mustafa K Mujeri contends that state-owned banks, dependent as they are on perpetual government bailouts, no longer function as banks at all. The former chief economist of Bangladesh Bank told Bonik Barta: “The public banks have been pillaged for years with official complicity. They have never been permitted to operate professionally. They can’t continue as they have. Their condition is now utterly precarious.”
Mujeri believes Bangladesh’s banks still have an opportunity to restructure following the Indian model. He said: “India’s banking sector was once in a similar state to ours. Over the past few decades it has strengthened its banks through reform and consolidation. It prioritised governance. Our banks walked the opposite path. Rather than establishing sound governance, we wrecked them. For the sake of the economy there’s now no alternative to restructuring. The government must begin with its own banks.”
Bangladesh currently has nine state-owned banks and 43 private banks. Domestic commercial banks therefore total 52. Sixteen of these received licences during the Awami League’s 15-year tenure. Neighbouring India, by contrast, has 33 domestic commercial banks — 21 private and 12 state-owned. India is of course vastly larger in both area and population.
Many of Bangladesh’s state-owned and private banks are now in a fragile condition. More than a dozen face an outright existential threat. Following the mass uprising of August 5, 2024, Bangladesh Bank dissolved the boards of 15 private banks. Several others whose boards remain intact are in similarly dire straits. The central bank’s data show that more than 30 percent of disbursed loans were classified as non-performing at the end of December last year. In September that year, the ratio stood near 35 percent.
The now-dissolved interim government issued the Bank Resolution Ordinance 2025 to merge banks weakened by irregularities and corruption. A decision was finalised under this ordinance to consolidate five shariah-based private banks into a single entity. The interim government had advanced the formation of Sammilito Islami Bank PLC considerably. A similar reform effort for state-owned banks was promised but never materialised.
Arif Hossain Khan, executive director and spokesperson of Bangladesh Bank, told Bonik Barta: “The Bank Resolution Ordinance permits only the merger of any weak bank that has outlived its utility. But a decision on state-owned banks must originate from the government as those banks belong to the state. Should the government take the initiative, Bangladesh Bank will assist in its execution.”
India’s consolidation of six banks into the State Bank of India (SBI) stands as a landmark reform in that country’s banking sector. In 2017, the government merged Bharatiya Mahila Bank and five regional banks into SBI. Two earlier mergers had already been absorbed in 2008 and 2010. The expansion has propelled the Indian lender’s footprint, asset base and commercial operations into the ranks of the world’s largest banks.
SBI’s financial statements show business volumes surpassed 103 trillion rupees in the third quarter of the 2026 financial year. Customer deposits stand at 57 trillion rupees. The loan book totals 46 trillion rupees. Of that sum, 6 trillion rupees have flowed to the SME sector alone. Despite this vast lending, non-performing loans represent just 1.57 percent of the portfolio. Operating profit for the latest quarter reached 328.62 billion rupees. Net profit exceeded 210 billion rupees. The bank posted a net profit of roughly 710 billion rupees in 2025. Return on assets measured 1.16 percent. Return on equity exceeded 20 percent.
SBI has evolved into one of the world’s foremost banks not solely by portfolio size or profit but by the sheer breadth of its network. It operates 244 branches across 29 countries. Its financing has spawned 27 subsidiaries spanning diverse sectors, eight joint ventures, and 18 associate entities. Through its subsidiaries the bank runs insurance, asset management, investment banking, card services and other financial operations. The joint ventures, forged with domestic and foreign partners, facilitate entry into new markets and product development. Among the associates, regional rural banks feature prominently. These institutions have proven vital for expanding financial inclusion across India’s rural economy, channelling agricultural credit, micro-enterprise finance and rural savings. SBI serves over 500 million customers through more than 23,000 branches. It also reaches them via over 63,000 ATMs and nearly 83,000 banking correspondent outlets.
Banker and author Faruq Moinuddin closely observed the Indian banking sector for several years through his professional postings. He told Bonik Barta: “India formed the Narasimham Committee in the 1990s to reform its banking sector. The committee’s landmark recommendations triggered sweeping changes. The objective was greater efficiency, technological adoption, transparency and a competitive, sustainable financial system. India achieved those goals by implementing the Narasimham blueprint. We embrace so much of India’s refuse but none of its good practice. A country that vast and populous has steadily reduced its bank count to the low thirties. We’ve done the opposite and multiplied banks endlessly. Pubali and Uttara Bank flourished after being privatised in the eighties. Every bank still owned by the state is now deeply distressed.”
Moinuddin argues that Bangladesh’s state-owned banks survive only because the government holds the title. He said: “Given the scale of irregularity and corruption inside the public banks, they ought to have collapsed. No bank in the world can survive with 50 percent non-performing loans. Tragically, most of our state-owned banks have crossed that threshold. The previous interim government did nothing whatsoever to reform them. It remains to be seen what the elected government does. But it must first decide whether it wants banks in name only, or actual banks.”
Among state-owned banks, Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank (BDBL) operate as commercial lenders. Their combined disbursed loan stood at BDT 3.28 trillion at the end of December last year. Of that sum, BDT 1.46 trillion was classified as non-performing. The default loan ratio for state-owned commercial banks therefore now sits at 44.44 percent.
The ratio had neared 50 percent in September last year. Rescheduling drove the modest decline in the final quarter. Three specialised state-owned banks — Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB) and Probashi Kallyan Bank — held loans totalling BDT 466.71 billion at year-end. Of these, BDT 185.86 billion, or roughly 40 percent, were non-performing.
With the sole exception of Sonali, every state-owned bank now suffers a shortfall in both capital and provisions. The aggregate provision deficit exceeds BDT 700 billion. The capital shortfall is of a similar magnitude. Many bank officials, however, question that the veracity of the financial reports submitted by those institutions. They contend that an asset quality review conducted by an international body would expose an even bleaker picture.
Following the 2024 July uprising, former finance secretary Mohammad Muslim Chowdhury was appointed chairman of the state-owned Sonali Bank. He has recently resigned from the post. Regarding reform of the state-owned banks, he told Bonik Barta: “Immediately after assuming the chairmanship, I submitted several reform proposals for the public sector banks to senior figures in the interim government. Reducing the number of banks was among them. I still believe there’s no justification for the government to own more than two banks. We could merge two or three others with Sonali Bank along the lines of State Bank of India. The remainder should be given to the private sector, as was done with Pubali and Uttara Bank. What the state-owned banks are doing now can’t be called banking.”
He added: “There’s considerable doubt whether the figures shown in the financial reports of the state-owned banks are true. The government must urgently conduct an asset quality review of these institutions. A forensic audit must also identify those responsible for irregularities and corruption and trace the destination of looted funds. Once the true financial picture emerges, steps should be taken to transfer several into the private sector.”
Criticism that Bangladesh has far more banks than economic utility or demand warrants is longstanding. Despite Bangladesh Bank’s opposition, licences for nine new private banks were issued simultaneously in 2012 on purely political grounds. Mosleh Uddin Ahmed, managing director of Shahjalal Islami Bank, told Bonik Barta: “One of the foundational crises in the banking sector is the excessive number of banks. Economists, bankers and all stakeholders have been saying this for a long time. The proliferation creates intense competition in a small market. Many banks, in struggling to survive, have made mistakes against their better judgment. The irregularities and corruption arising from collusion between boards and management are now visible. To strengthen the sector, we must reduce the number of banks and enforce proper governance. There’s no other alternative for the sake of the national economy.”