Experts at a seminar in the capital on Saturday called for finding ways to keep the banking sector away from "patronage politics".
The central bank needs to come out of the grip of the government and bank owners and should exercise much more autonomy in its functions, they said.
The views came at a dialogue on "What Do We Do with the Banking Sector of Bangladesh?" held in the city.
Leading think-tank Center for Policy Dialogue (CPD) organised the event.
"If there is one sector in the country which has seen deterioration over the years, especially in terms of transgression of laws-that sector is banking," said economist Wahiduddin Mahmud.
"But this sector is the heart of all the economic activities of the country," he said.
Dr Mahmud's comments came after the CPD researchers revealed the country has lost Tk. 225.02 billion (22,502 crore) during the last 10 years through major scams, irregularities and heists.
This amount is equivalent to 39 per cent of the tax revenue of the government during fiscal year 2017-18 as of May 2018, the CPD experts estimated.
This is also equivalent to 78.2 per cent of Padma Multipurpose Bridge or 64.3 per cent of Padma Bridge rail link, said executive director of CPD Fahmida Khatun in her keynote presentation.
This Tk. 225.02 billion would also be enough for funding the Dhaka mass rapid transit development project, she pointed out.
"We need to find ways of keeping the banking sector away from patronage politics or any illegal transaction," Professor Mahmud said.
"We also need to find ways of incentivising the politicians so that whoever comes to power in future, they will not use banks for any illegal or unethical financial gains", he added.
Professor Mahmud noted that back in the 1980s, the country started massive privatisation of the banking sector without properly putting in place the necessary control framework.
"Now we are doing the same mistake as we are moving towards massive merger and acquisition of the banks without any appropriate control framework," he pointed out.
"If not properly controlled, this may result in monopoly as too many banks will get into the hands of too few," the eminent economist warned.
"Ultimately, the whole economy will become captive to a few rich individuals as a result," he said.
Experts at the event also called for greater autonomy of the central bank.
"The legal and moral duty of restraining and regulating the bank owners and bank boards should ideally be bestowed upon the central bank", said banking sector specialist Ibrahim Khaled.
"But up until now, Bangladesh Bank has failed to perform that duty," the former deputy governor of the central bank said.
"In countries like India, the government never interferes in the operations of the central bank. But in case of Bangladesh, the picture is totally opposite," Mr Khaled said.
He argued that nowhere else in the world, the central bank governor would hold meetings with the private bank owners regarding the policy decisions to be taken by the central bank.
"But here in our country, Bangladesh Bank governor has reduced CRR after holding a meeting with private bank owners at a hotel," he said.
"In India, the central bank governor is accountable to parliament while in our country, the Bangladesh Bank governor is accountable to the Finance Ministry," Mr Khaled said.
The former deputy governor also expressed his anger at the recent amendment under which up to four members of the same family would be allowed to be on the bank board.
"Once the new parliament is formed next year, there should be a detailed discussion in parliament on the status of the banking sector based on a survey report," Mr Khaled said.
"At the same time, the central bank governor should be appointed by the President based on the recommendations from the parliament," he said.
"Finance Ministry should not give any instruction to the central bank-either orally or in writing," he added.
Former governor of Bangladesh Bank Dr. Salehuddin Ahmed, in his speech, called for the formation of an independent banking commission to resolve the ongoing problems in the banking sector.
"There should also be mergers within the banks as there are a huge number of banks with a few branches," he said.
"The central bank has lots of autonomy but that autonomy should be applied," the former BB governor said.
Distinguished fellow of CPD Dr Debapriya Bhattacharya said his organisation would form a citizen's commission after the election to identify and analyse the problems in the banking sector and to present them to the government.
Lead economist of the World Bank in Dhaka Dr. Zahid Hussain, in his speech, said there is a nexus between regulators, bankers and big borrowers, which has resulted in the current dilemmas in the banking sector.
"Instead of becoming a tool for financial inclusion, banks are becoming extractive institutions in the country", he said.
"Providing regulators with enough autonomy is not adequate. We also need to see whether the regulator is capable enough to exercise that autonomy," Dr. Hussain added.
"We need to distinguish between people who are willful defaulters and people who are defaulters for some valid reasons," said Dr. Shah Md. Ahsan Habib, director of Bangladesh Institute of Bank Management.
"People who are not willful defaulters need special support and special measures," he added.