In a bowl, stir water and milk powder until powder is dissolved. Add pudding mix; whisk for 1-2 minutes or until thickened. Fold in 1/4 cup whipped topping and 1/4 teaspoon extract. Layer banana slices in the crust; top with pudding mixture. Cover and refrigerate.
Combine remaining whipped topping and extract; spread over pudding. Sprinkle with coconut. Cover and refrigerate for at least 1 hour before serving.