It, however, thinks that any failure of privatisation process may turn out to be worse than the government ownership impact.

Citing an international experience on privatisation, the WB suggested that privatisation process should be ideally undertaken by an entity that is independent from the political sphere.

It said this would send the wrong signal if the government would like to continue influencing decisions in the banks.

The WB in its report on Bangladesh: Strategy for Sustained Growth recommended a more efficient financial system.

The report further said the NCBs' privatisation process should be coupled with a resolution of the bad debts of the state-owned enterprises (SoEs).

The government should ensure a level playing field for the privatised NCBs and other providers of financial services, it also suggested.

The report remarked that a proper and transparent divestment process for the NCBs and de-politicisation of the financial sector regulations and supervision can serve as a role model in the divestment of other public sector entities.

An autonomous and accountable Bangladesh Bank can similarly be a paragon for broader institutional reform, the report said.

Dwelling on the overall situation of Bangladesh's financial system, the report said licensing process of the financial system has to be run on objective and non-political basis.

It pointed out that the central bank has not been immune from political interference in the bank licensing process, and is often forced to follow 'recommendations' of the political class to allow new banks. Fortunately, such practice has ceased in recent years, the report, however, said.

Besides, according to the WB report, the past practice resulted in a number of weak private commercial banks (PCBs) plagued by insider lending and other abuses by owners. Political capture of the regulatory entity also prevented proper resolution of the failing banks, the report added.

It also highlighted about sustainability of large number of banks operating in a small market like Bangladesh.

The report said as there are a large number of banks in the market, a temporary and limited moratorium on new bank licence should be imposed, when all banks should be subjected to special audits to assess their long-term viability.

And then, the banks that are found non-viable should be resolved, preferably through market-based solutions such as merger and acquisitions or purchase and assumption of operations, the report said.

The legal and regulatory framework for bank failure resolution should be reviewed and reformed and finally, a medium term to long term financial sector strategy should be developed that lays out further reforms in a clear and transparent manner, the report observed.