BAB welcomes reform-driven Budget FY2026–27; pledges full support

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The Bangladesh Association of Banks warmly welcomes the FY2026–27 national budget as a courageous turning point for the financial sector, applauding the Tk. 40,000 crore bank recapitalisation, governance reforms and bond-market commitments. BAB pledges full partnership with the Government, while urging swift recovery of looted assets, safeguards against defaulters’ return, fair and consistent tax treatment for banks, and protection of private credit from crowding-out.

The Bangladesh Association of Banks (BAB) welcomes the national budget for FY2026–27 presented to Parliament on 11 June 2026 by the Hon’ble Finance Minister. The Association commends the Government for placing the stability of the banking and financial sector at the heart of its economic strategy, and for presenting a budget of ambition and direction at a defining moment for the country.

The Association particularly welcomes the approximately Tk. 40,000 crore allocated for the recapitalisation of weak banks; the risk-based supervisory framework aligned with international standards of capital adequacy and corporate governance; the firm commitment to ending political interference in banking; and the development of corporate and municipal bond markets to ease long-term pressure on the system. The raising of the excise-duty exemption on deposits to Tk. 4 lakh and the rationalisation of excise duty to a single charge per loan facility directly benefit depositors and borrowers, while the Tk. 60,000 crore Stimulus Package 2026, with its 6 percent interest subsidy, and the deregulation agenda — dividend repatriation, simplified trade procedures and single-window investment services — send a strong signal of confidence to investors. BAB also appreciates the prudent decision to finance a larger share of the deficit externally. The member banks of BAB stand ready as full partners — as the channel for stimulus financing, financiers of the new economic zones and export industries, and the backbone of the digital, cashless economy the budget envisions.

In the same constructive spirit, the Association respectfully draws attention to areas where focus will determine success: 

First, recovery must accompany recapitalisation. Public funds committed to restoring weak banks will achieve lasting results only when matched by swift legal recovery of misappropriated assets, decisive enforcement against wilful defaulters, and transparent treatment of shareholdings acquired through irregular means. Depositors’ confidence rests on accountability. Further, there should have been a dedicated budgetary allocation for establishing an Asset Management Company (AMC) to clean up the balance sheets of weak banks, reduce their NPL burden and ease capital shortfall challenges across the sector.

Second, the resolution framework must protect reform credibility. The proposed bank resolution framework should carry clear safeguards ensuring that parties whose conduct contributed to the distress of financial institutions cannot re-enter the system.

Third, private credit must be protected. The planned borrowing of Tk. 1.12 lakh crore from the banking system, at a time when private-sector credit growth stands at a historic low, risks crowding out the very investment the budget seeks to revive. The Association urges disciplined adherence to the external financing plan and early development of the bond market as a genuine alternative.

Fourth, the tax net should grow without shrinking inclusion. The requirement of TIN for bank accounts and the integration of tax and banking databases — fully supported in principle — should be implemented in phases, with appropriate thresholds for small and rural depositors, so that t he expansion of the tax net does not reverse two decades of hard- won financial inclusion.

Fifth, fiscal policy should reinforce capital rebuilding. Publicly listed banks should be taxed on the same basis as other publicly listed companies. The Association invites the Government to consider a medium-term roadmap on the taxation of banks, currently at 37.5 percent, so that fiscal policy reinforces — rather than constrains — the capital strengthening that the budget itself has so rightly prioritised. For weak banks specifically, BAB also urges corporate tax relief for a considerable period so that retained earnings can be used to recover capital and provisioning shortfalls, strengthen capital adequacy and accelerate balance-sheet repair.

Sixth, dividend taxation should not discourage institutional investment in the capital market. Banks are among the largest institutional investors in the stock market, and dividend income from listed securities is paid out of profits already taxed at company level. Taxing it again at the full corporate rate would deter banks from listed equities and push them toward risk-free government securities, contradicting the Government’s own objective of a deeper, more liquid capital market. BAB therefore urges that tax on dividend income from stock-market investments be waived for banks and institutional investors, and that the additional 10 percent tax on stock dividends — particularly where issued by banks to meet Bangladesh Bank capital-adequacy requirements — be withdrawn.

Seventh, provisioning shortfalls should, in time, be treated outside taxable income. While primarily a matter of accounting policy rather than the budget itself, BAB encourages the Government and Bangladesh Bank, going forward, to allow loan-loss provisions and provisioning shortfalls to be treated outside taxable income, so that banks are not taxed on income already absorbed by regulatory provisioning and capital-rebuilding requirements.

Eighth, the transition to a cashless, digitally inclusive economy must be fiscally supported. The budget’s vision of a digital, cashless society will require banks to invest heavily in technology — core systems, payment infrastructure, cybersecurity, data centres and the supporting hardware and software. BAB urges the Government to exempt from duties and taxes the software, hardware and digital infrastructure that banks must deploy to build this ecosystem, so that taxation does not slow the very digital financial inclusion the budget rightly champions.

The Association reaffirms its full support to the Government, Bangladesh Bank and the National Board of Revenue, and looks forward to continued consultation on the Finance Bill 2026 and its implementing circulars. – Press release