This paper explores the dynamic impact of monetary policy on bank performance in Bangladesh considering panel data from 20 local conventional commercial banks spanning 2013 to 2024. Adopting a two-step System GMM estimation technique, the research rigorously examines the effects of key monetary policy instruments such as repo rate, T-bond rate, cash reserve ratio (CRR) and statutory liquidity ratio (SLR) on the profitability measures estimated with return on assets (ROA), return on equity (ROE) and net interest margin (NIM) ratio of banks. The empirical results reveal that higher short-term interest rates adversely affect bank profitability by raising funding costs and compressing net interest margins while higher long-term interest rates and bank rates tend to enhance returns. Stricter reserve requirements significantly diminish profitability by limiting banks’ lending capacity. The study also finds that strong capital adequacy, operational efficiency and effective credit risk management are vital for enhanced bank performance. In addition, favorable macroeconomic conditions such as robust GDP growth and moderate inflation further support profitability. These findings underscore the need for a balanced and well-coordinated approach to monetary and regulatory policy enabling policymakers and practitioners to sustain profitability and promote stability within Bangladesh’s banking sector.