Business Desk :
High level of default loans, failure to implement banking regulations, and limited autonomy for the Bangladesh Bank are the major challenges facing the banking sector on Thursday. This prompted a number of former central bank governors and a top businessman yesterday to call for extending greater autonomy to the central bank and bringing down default loans. Both the government and the BB should address the issues with utmost importance as a vibrant banking sector is crucial to accelerate the economic growth of the country, they said.
“Integrity in the financial sector is important to keep it stable,” said Wahiduddin Mahmud, an eminent economist.
Salehuddin Ahmed, a former BB governor, said that the country had achieved many economic goals, but discussions related to the problems faced by the banking sector had diminished.
“The BB is enjoying autonomy on paper. So, we should ensure its freedom to be operational.”
They made the comments at the Second Bangladesh Economic Conference styled “The Five Decades of Bangladesh’s Development Journey: Role of Central Bank” at the InterContinental Dhaka.
The Bonik Barta, a Bengali newspaper, in cooperation with City Bank organised the event.
Prof Mahmud said that many reforms had been brought about in the country’s financial sector.
“We did not know initially what types of regulations should be followed to operate private banks when the BB allowed them to roll out businesses for the first time,” he said.
Anybody can take over a bank by purchasing shares in a free market economy, said Mahmud, also a former professor of the economics department at Dhaka University.
The characteristics of banks are different from other listed companies as depositors keep their money with a trust, so rules and regulations of banks should have been stronger.
“We are yet to learn the regulations on how to prevent a family from taking over a number of banks. We will learn this as the country is set to become a middle-income country.”
Mashiur Rahman, economic affairs adviser to the prime minister, said non-performing loans (NPLs) in the banking sector had gone beyond control.
“If banks are unable to recover default loans and mobilise new deposits, the capacity of giving out loans by lenders faces a setback.”
He called non-payment of loans a social crime.
Up until September this year, NPLs stood at Tk 101,150 crore, up 14 per cent from nine months earlier and 7.1 per cent year-on-year, data from the BB showed.
“Banks will have to improve their skills to verify borrowers’ ability to repay loans before giving out loans,” Rahman said.
Banks also go through difficult situations to sell mortgaged assets of defaulters, the adviser said. “An effective bankruptcy act will solve the problem.”
Mohammed Farashuddin, a former governor of the BB, said that proper action should be taken against the scammers just after completion of a probe.
“Corruption starts to spread if a probe report is confined to a drawer,” he said.
He said a major portion of the stimulus packages, unveiled after the pandemic struck the economy, have gone to the large borrowers, depriving the small entrepreneurs.
“The issue should be dealt with importance.”
Farashuddin went on to urge the central bank to carry out a study to depreciate the local currency against the US dollar to some extent.
Salehuddin Ahmed said political influence should not be encouraged as it is harmful for the autonomy of the BB.
“The country’s financial norms are aligned with global practices. So, ensuring compliance is essential.”
Atiur Rahman, another former governor, said that the financial sector would have to move forward by overcoming the challenges of default loans and climate changes.
He requested the government to extend support to three sectors – agriculture, remittance and export.
He proposed the government give an additional one per cent subsidy to the remitters, including the existing two per cent.
