Bangladesh Bank: Functions, Role, and How It Works
Bangladesh Bank is the first central bank in the world to introduce a dedicated public complaint hotline (16236) for banking issues and according to Wikipedia, it was the first central bank to introduce a Green Banking Policy. This reflects an institution that has, at various points, led on innovation even as it navigates significant structural pressures.
This article covers what Bangladesh Bank is, what it does, how it is governed, how its monetary policy works, and the major reforms being implemented in 2025–2026. It is for Bangladeshi students, professionals, and anyone who wants a clear, factual reference on their central bank.
What Is Bangladesh Bank?
Bangladesh Bank is the central bank of Bangladesh , the country's primary monetary and regulatory authority, responsible for issuing currency, managing monetary policy, supervising the banking sector, and managing foreign exchange reserves.
According to Wikipedia, Bangladesh Bank considers its founding date as December 16, 1971, but it was formally reorganised under the Bangladesh Bank Order in April 1972, under the Bangladesh Bank Order (P.O. No. 127 of 1972), which reorganised the Dhaka branch of the State Bank of Pakistan as Bangladesh Bank immediately after independence. It is fully owned by the Government of Bangladesh.
Key institutional facts of Bangladesh Bank as of March 2026 include:
- Headquarters: Bangladesh Bank Building, Motijheel, Dhaka
- Current Governor (2026): Md. Mostaqur Rahman
- Total branch offices: 10 Branch Offices including Motijheel, Sadarghat, Chittagong, Khulna, Bogra, Rajshahi, Sylhet, Barisal, Rangpur, and Mymensingh
- Official website: bb.org.bd
- Public complaint hotline: 16236 (the first dedicated banking complaint hotline of any central bank globally)
It should be noted that Bangladesh Bank does not print the 1-taka or 2-taka notes, those denominations are issued by the Ministry of Finance and no bank can open or relocate a branch anywhere in the world, including outside Bangladesh, without prior Bangladesh Bank permission.
Core Functions of Bangladesh Bank
Bangladesh Bank performs five primary functions including, formulating and executing monetary policy, issuing currency, supervising and regulating all banks and financial institutions, managing the country's foreign exchange reserves, and acting as the government's banker.
Monetary Policy
Bangladesh Bank formulates and implements monetary policy to maintain price stability and support economic growth. This includes setting the policy interest rate , currently 10.0%, maintained unchanged since October 2024. According to Prothom Alo, Bangladesh Bank maintained the policy rate at 10% in early 2026 to control inflation., managing money supply, and controlling inflation. The bank publishes a Monetary Policy Statement (MPS) twice a year covering two half-year periods. The current revised inflation target is "below 8.0% by end of FY26" , itself a revision upward from the original 7.0% target, reflecting persistent inflationary pressure.
Currency Issuance
Bangladesh Bank has the exclusive authority to issue banknotes of ৳10 and above. The Ministry of Finance issues the smaller ৳2 and ৳5 notes. Following the July Revolution of 2024, Bangladesh Bank announced plans to redesign all banknotes , removing the portrait of Sheikh Mujibur Rahman and replacing it with national heritage imagery.
Banking Regulation and Supervision
Bangladesh Bank licenses all scheduled banks and non-bank financial institutions (NBFIs). It conducts both on-site and off-site supervision of banks, sets capital adequacy requirements, issues prudential regulations, and has the authority to revoke banking licences. Risk-Based Supervision (RBS) launched on 4 January 2026, replacing the previous checklist-based inspection system. Over 500 Bangladesh Bank officials were trained ahead of implementation. This transition aligns Bangladesh with IMF programme conditions and international supervisory best practices.
Foreign Exchange Management
Bangladesh Bank also manages Bangladesh's foreign exchange reserves and sets exchange rate policy. According to Prothom Alo's review of the central bank's external sector data, Gross international reserves (BPM6 basis) reached USD 28.52 billion at end December 2025 , a significant recovery from the August 2024 low of USD 25.6 billion . Gross reserves (non-BPM6) reached USD 33.19 billion at the same date. Bangladesh Bank introduced a crawling peg exchange rate mechanism in May 2024, starting at BDT 117/USD. Full FX flexibility was implemented on 14 May 2025 (FE Circular No. 18).
Banker to the Government
Bangladesh Bank acts as the fiscal agent and banker for the Government of Bangladesh , managing government accounts, facilitating government borrowing through Treasury bills and bond auctions, and managing the public debt registry. Government net borrowing from the banking system reached BDT 50,782 crore in H1 FY26, 43% of the revised annual target.
Organisational Structure of Bangladesh Bank
Bangladesh Bank is governed by a Board of Directors chaired by the Governor, with the executive staff , headed by the Governor and four Deputy Governors , responsible for day-to-day operations. According to Wikipedia, the Governor also serves as the chief executive and chairs the Board of Directors of Bangladesh Bank.
The Governor: The Governor is the bank's highest official, chairs the Board of Directors, and leads the executive staff. According to Reuters, Md. Mostaqur Rahman was appointed Governor of Bangladesh Bank on February 25, 2026, replacing Ahsan H. Mansur. He has been pursuing an amendment to the Bangladesh Bank Order 1972 to elevate the Governor's rank to ministerial status and introduce an independent appointment committee for the Governor and Deputy Governors. As of early 2026, bureaucratic resistance within the Finance Ministry has delayed implementation.
Board of Directors of BB:
The Board is composed of:
- The Governor
- One Deputy Governor nominated by the government
- Four non-governmental directors (nominated by the government) with experience in banking, trade, commerce, industry, or agriculture
- Three government officials nominated by the government
Executive staff
Under the Governor there are four Deputy Governors, then Executive Directors, an Economic Advisor, and department directors. Each of the bank's 10 branch offices is headed by an Executive Director.
6 Key departments of Bangladesh Bank include:
- Monetary Policy Department
- Banking Regulation and Policy Department
- Foreign Exchange Policy Department
- Bangladesh Financial Intelligence Unit (BFIU) , responsible for anti-money laundering (AML) and counter-terrorism financing (CTF) oversight
- Statistics Department
- Debt Management Department
Monetary Policy in Practice
As of April 2026, Bangladesh Bank conducts monetary policy primarily through its policy interest rate , currently set at 10.0% , and through open market operations that manage liquidity in the banking system. Reports from PANBD indicate the new Governor “MD Mostaqur Rahman“ has signalled a possible review of high interest rates to support investment and economic growth.
Policy rate mechanics: The policy rate (repo rate) is the interest rate at which Bangladesh Bank lends to commercial banks overnight. A higher rate increases the cost of borrowing, reduces credit growth, and helps bring inflation down. A lower rate reduces borrowing costs and stimulates lending. Bangladesh Bank has maintained a contractionary monetary stance , holding the policy rate at 10.0% , to push inflation toward the target ceiling.
According to Bangladesh Bank’s monetary policy reporting, as of March 2026, the Standing Lending Facility (SLF) is 11.5% while the Standing Deposit Facility (SDF) was reduced to 7.5%.. because banks were parking excess liquidity at the SDF rather than lending to the interbank market or private sector. The real policy rate turned positive at approximately +1.51% by end December 2025 , the first time in an extended period.
Inflation: As of February 2026, annual CPI inflation stands at 9.13% , above the revised target of "below 8.0%" (source: BBS/BSS News, March 2026). Food and non-alcoholic beverages inflation reached 9.30%. The IMF projects end-FY26 inflation at 8.7%; Bangladesh Bank's own forecast is 7.92%.
Reserve requirements: Commercial banks must maintain a Cash Reserve Ratio (CRR) with a daily minimum of 3.0% (reduced from 3.5% effective March 2025) and a bi-weekly average of 4.0% (source: MPS H2FY26). The Statutory Liquidity Ratio (SLR) for conventional scheduled banks is 13%; for Islamic banks it is 5.5% (source: CEIC/Bangladesh Bank).
Liquidity management: Bangladesh Bank manages market liquidity through repo and reverse repo transactions, open market operations, and adjustment of the CRR and SLR. The bank has operated a buy-only FX intervention policy since August 2024, purchasing USD 4.3 billion from the interbank market in FY26 to stabilise the exchange rate.
For example, if Bangladesh Bank cuts the policy rate, commercial banks can borrow from BB more cheaply , leading them to reduce their own lending rates, which stimulates borrowing, investment, and economic activity. If Bangladesh Bank raises the rate, credit becomes more expensive, demand slows, and inflationary pressure eases.
Foreign Exchange Reserves and Exchange Rate Policy
Bangladesh Bank manages the country's foreign exchange reserves, which stood at USD 28.52 billion (BPM6 basis) at end December 2025 , rising from USD 25.6 billion in August 2024, with further recovery to approximately USD 35.1 billion (gross) by February 2026.
Reserves recovery: The reserves increase was driven by record remittance inflows. In January 2026, Bangladesh's remittance inflows reached USD 3.17 billion, representing a significant 45% year-on-year surge. This growth followed a strategic move by Bangladesh Bank to clear USD 3.5 billion in outstanding correspondent banking arrears, effectively reopening formal channels for these financial transfers.
Exchange rate mechanism: Bangladesh Bank moved to a crawling peg in May 2024, starting at BDT 117/USD. Full FX flexibility was implemented on 14 May 2025 (FE Circular No. 18). The interbank spot rate at end December 2025 was 122.31 BDT/USD , a 0.38% appreciation versus end June 2025 (source: MPS H2FY26). The REER appreciated 6.63% in H1FY26, moving to 102.74 from 96.35, suggesting the BDT is slightly overvalued in real terms relative to trading partners.
Daily exchange rates: Bangladesh Bank publishes daily exchange rates for all major currencies at bb.org.bd/en/index.php/econdata/exchangerate.
Bangladesh Bank and the Banking Sector
Bangladesh Bank is the sole regulatory authority for all 62 scheduled banks in Bangladesh , licensing them, supervising their operations, setting capital requirements, and intervening when they face distress.
Licensing and supervision: Bangladesh Bank grants banking licences, conducts on-site inspections, reviews financial statements, and assesses compliance with capital adequacy, liquidity, and risk management requirements. All scheduled banks must maintain a minimum Capital Adequacy Ratio (CAR) of 12.5%.
Deposit protection: According to the central bank governor's briefing reported by BSS, The Deposit Protection Ordinance 2025 (DPO 2025), approved 23 November 2025, raised the deposit insurance coverage limit to BDT 2 lakhs (200,000) per depositor , covering approximately 93–95% of individual retail depositors (source: TBS News, November 2025). NBFIs are now brought under the deposit protection framework for the first time, with effective coverage beginning July 2028. The settlement time for deposit insurance claims was reduced from 180 working days to 17 working days under DPO 2025.
Bank resolution: The Bank Resolution Ordinance 2025 gave Bangladesh Bank the legal authority to intervene rapidly in failing banks. In 2025, this power was used to merge five troubled Islamic banks , EXIM Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, and Union Bank , into Sammilito Islami Bank, a new Shariah-compliant government-owned bank with a capital base of BDT 33,000 crore (source: MPS H2FY26 context). This was the largest bank resolution action in Bangladesh's history. Nine NBFIs are also being liquidated under the Bank Resolution Ordinance 2025 (source: MPS H2FY26).
Non-performing loans: According to Prothom Alo, non-performing loans (NPL’s) rose to around 36% in September 2025 following stricter loan classification rules. Bangladesh Bank attributes the jump to stricter asset classification rules rather than actual deterioration. State-owned banks, which hold less than 30% of banking assets, account for more than 45% of problem loans , a structural imbalance Bangladesh Bank is addressing through stricter classification and governance reform.
Effective 1 August 2023, a mandate from Bangladesh Bank requires all authorised dealer banks to provide precise reporting on the specific transaction medium , be it Online, POS, ATM, or QR Code , for every foreign currency transaction processed through ICMS. This regulatory framework is designed to establish a clear distinction between physical card usage and online payments made to freelancers.
Bangladesh Bank's 2025–2026 Reform Agenda
According to The Business Standard, the new Governor prioritised reducing lending rates, controlling inflation, and restoring banking sector stability. Bangladesh Bank is currently implementing the most significant set of reforms in decades , including transitioning to risk-based bank supervision, strengthening central bank autonomy, and resolving the country's non-performing loan crisis.
Risk-based supervision: According to BBS, RBS launched on 4 January 2026, with 500+ Bangladesh Bank officials trained ahead of implementation . Under RBS, Bangladesh Bank continuously monitors bank risk profiles rather than conducting periodic compliance checks. This aligns Bangladesh with IMF programme conditions and replaces the previous checklist-based inspection system.
Central bank independence: The former Governor Mansur (2025) was pursuing an amendment to the Bangladesh Bank Order 1972 to reduce government influence over the central bank. Proposed changes include removing government officials from the Board, introducing an independent search committee for Governor and Deputy Governor appointments, and granting the Governor ministerial-equivalent status. Bureaucratic resistance within the Finance Ministry has delayed implementation as of early 2026.
Banking sector consolidation: Following the 2025 merger of five troubled Islamic banks, Bangladesh Bank continues overseeing bank-sector consolidation under a policy initiated in April 2024. According to Muslim Network TV, The five-bank merger into Sammilito Islami Bank is the first exercise of the Bank Resolution Ordinance 2025's full resolution powers.
Digital banking: Bangladesh Bank reopened applications for digital bank licences in 2025. Open Banking Guidelines and API protocols are targeted for release by June 2026 to enable fintech-bank collaboration. As of March 2026, Offshore Banking Units (OBUs) are required to provide notification to Bangladesh Bank within 7 days of beginning their operations. These units are prohibited from closing without obtaining prior authorisation from the central bank and must ensure their financial records remain strictly isolated from domestic banking activities. Furthermore, the parent bank's head office retains full legal liability for all obligations incurred by the OBU.
IMF programme: Bangladesh Bank is implementing reforms tied to a $5.5 billion IMF loan programme.
FAQs About Bangladesh Bank
What is Bangladesh Bank?
Bangladesh Bank is the central bank of Bangladesh, established on 7 April 1972. It is the country's sole monetary authority, responsible for currency issuance, monetary policy, banking regulation, and foreign exchange management.
Who regulates banks in Bangladesh?
Bangladesh Bank regulates all 62 scheduled banks in Bangladesh, as well as non-bank financial institutions (NBFIs). It has the authority to grant and revoke banking licences, set capital requirements, and intervene in failing banks.
What is Bangladesh Bank's current policy rate?
The policy rate is currently 10.0%, maintained unchanged since October 2024 (source: MPS H2FY26, BSS News February 2026). The rate reflects a contractionary stance aimed at bringing inflation below the revised 8.0% target.
Who is the current Governor of Bangladesh Bank?
Md. Mostaqur Rahman was appointed Governor of Bangladesh Bank on February 25, 2026, replacing Ahsan H. Mansur. He confirmed in December 2025 that PayPal has expressed intent to begin operations in Bangladesh, marking the strongest official signal to date , though PayPal is not live as of March 2026.
What is Bangladesh Bank's complaint hotline?
16236 is Bangladesh Bank's public complaint hotline for banking issues , the first dedicated banking complaint hotline introduced by any central bank globally.
Where can I find Bangladesh Bank's exchange rates?
Daily exchange rates are published at bb.org.bd/en/index.php/econdata/exchangerate.
Key Takeaways
Bangladesh Bank is the central bank of Bangladesh established with retrospective effect from December 16, 1971, the date of the country's independence. It issues currency, formulates monetary policy, regulates all 62 scheduled banks, manages foreign exchange reserves, and acts as the government's banker. The current Governor is Md. Mostaqur Rahman. The policy rate stands at 10.0% (source: MPS H2FY26), with a revised inflation target of "below 8.0%" for FY26. Gross foreign exchange reserves (BPM6 basis) stood at USD 28.52 billion at end December 2025, rising toward USD 35.1 billion gross by February 2026, supported by record remittance inflows of USD 3.17 billion in January 2026 alone.
Bangladesh Bank is in the middle of its most significant reform cycle in decades: Risk-Based Supervision launched in January 2026; five troubled Islamic banks were merged into Sammilito Islami Bank under the Bank Resolution Ordinance 2025 , the largest bank resolution action in Bangladesh's history; the Deposit Protection Ordinance 2025 raised deposit insurance coverage to BDT 2 lakhs per depositor; and Governor Mansur is pushing for an amendment to the Bangladesh Bank Order 1972 to strengthen central bank independence. These reforms are tied to Bangladesh Bank's IMF programme conditions and will shape the country's financial stability over the coming years.
The information provided in this article is for informational and educational purposes only and should not be construed as financial advice. Before making any financial decisions, it is highly recommended that you seek advice from a qualified financial advisor who can consider your individual financial circumstances and objectives.
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