In Bangladesh, about 95% of the total irrigation demand is fulfilled by small-scale irrigation. The availability of surface water resource is decreasing day by day during the dry season but the demand for irrigation is increasing and pressure is growing towards the groundwater resources in recent years. Groundwater resource is declining due to increase use of tube wells for irrigation, rapid urbanization and industrialization. Groundwater recharge that occurs during monsoon rainfall and flooding has been reduced drastically mainly because of climate change impact and unplanned paving. On the other hand, demand is increasing day by day. In this situation, appropriate and organized approach should be maintained for assessment and utilization of this limited groundwater resource to ensure environmental sustainability with fulfilling people’s demand. This study attempts to investigate flow dynamics and assess the groundwater resource in the northwest region of Bangladesh. We developed MIKE SHE groundwater models for the region that were calibrated and validated with the observed groundwater level data. The model also incorporated simulation of the unsaturated zone and river flow processes using associate MIKE suite of software. In this way, emphasis was given to encapsulate the SW and GW flow dynamics in the river basin. Two scenarios were considered 1) to assess the base conditions of current water balance and existing trends of fluctuation throughout the year and 2) long-term effects of probable future abstraction and climate change impact. A comprehensive water balance analysis has also been undertaken to assess local scale groundwater recharge dynamics and interactions between surface water and groundwater.