"We face new challenges and non-traditional security threats. The rise of religious fundamentalism, extremism and terrorism are not unfamiliar to our region. Such forces sap away the strength of our societies, threaten our state systems and are an impediment to our advancement," he told a leading Bangladeshi think-tank.
Krishna said India and Bangladesh have had good cooperation in fighting fundamentalist and extremist forces and "it is imperative that we continue to join hands to fight terrorism in all its forms and manifestations" so that "this creed will never gain ascendancy and we shall secure for ourselves and our peoples the hope of stability, development, peace and prosperity."
Wrapping up his official visit here during which Bangladesh put a lid on the controversy set off by Prime Minister Manmohan Singh's "off-the-record" remarks about 25 per cent Bangladeshis being anti-India, Krishna said "I am very satisfied with the outcome (of his talks with top Bangladeshi leaders) and am positive that we are poised for significant developments".
Krishna said both Bangladeshi Prime Minister Sheikh Hasina and President Zillur Rahman "indicated their desire to take our relations to a higher level".
Terming India and Bangladesh as "natural partners" due to geographical proximity, Krishna said there was a "new momentum" in bilateral relations in recent times.
"I can emphatically say that our bilateral relations are perhaps the best ever in recent times," he said.
Krishna indicated that an agreement on land boundary and sharing of waters of Teesta and Feni rivers would be the cornerstone of Prime Minister Manmohan Singh's visit to Bangladesh in September.
"India and Bangladesh cannot afford to miss this historic opportunity to work together to be a part of the new future," he added.
Krishna said he was "hopeful that the outstanding land boundary issues between us will be resolved in the near future in a fair, reasonable and mutually-acceptable manner.
Discussions are ongoing and I sense willingness on both sides to resolve this age-old issue".
The External Affairs Minister said he was optimistic that "we shall reach a mutually acceptable and pragmatic" agreement on sharing of the Teesta and Feni waters.
He said there was a need for "mutual sacrifice in view of declining flows of waters (of common rivers) due to climate change".
Referring to bilateral commerce, Krishna said trade volumes are low and the share of India-Bangladesh trade in the global context still remains small.
"The bulk of your imports from India are raw materials which are processed further in Bangladesh for exports. The priority should be to significantly increase the volumes of trade. I believe this can be made possible if we look at trade and investments in conjunction," Krishna said.
He said two-way flow of investments between India and Bangladesh will not only provide gainful employment and production but also lead to increased export earnings.
Krishna said while a number of Indian corporate entities are looking forward to opportunities for investments in Bangladesh, there is potential for Bangladeshi investments in India.
The External Affairs Minister stressed for greater connectivity between the two countries, saying the issue should be seen in a "dynamic concept of markets that are growing rapidly on both sides of the borders and in the north-east of India where the growth could be even more rapid than the rest of India"
"I can visualise connectivity will spur economic growth and development on both sides of the border. It is not simply a flow of goods and services across frontiers in the context of transit," he said.
Get Breaking news, live coverage, and Latest News from India and around the world on NDTV.com. Catch all the Live TV action on NDTV 24x7 and NDTV India. Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.