  Historically, the performance of the banking sector has been weak,
characterized by weak asset quality, inadequate provisioning, and negative
capitalization of state-owned banks. To overcome these problems, the initial
phase of banking reform (1980-1990) focused on the promotion of private
ownership and denationalization of nationalized commercial banks (SCBs). During
the second phase of reform, Financial Sector Reform Project (FSRP) of World
Bank was launched in 1990 with the focus on gradual deregulations of the
interest rate structure, providing market-oriented incentives for priority
sector lending and improvement in the debt recovery environment. Moreover, a
large number of private commercial banks were granted licenses during the
second phase of reforms. Bangladesh Bank adopted Basel-I norms in 1996 and
Basel-II during 2010. Moreover, the Central Bank Strengthening Project
initiated in 2003 focused on effective regulatory and supervisory system,
particularly strengthening the legal framework of banking sector. This study
evaluates how successfully the banking sector of Bangladesh has evolved over
the past decades in light of financial reform measures undertaken to strengthen
this sector.
