NEWS report said the central bank has finally blocked Tk 284 crore from Rupali Bank’s account as penalty as the state owned commercial bank had failed to arrest its soaring credit growth last year ignoring the Bangladesh Bank’s limit in this regard. Fining a bank is not a good sign but we fear that faulty management is responsible at many banks to compromise the financial interest of banks to promote personal interest of businesses and some individuals. We hold the view that such persons must also be identified and punished to end bad practices. News report said Bangladesh Bank on Tuesday in a letter informed Rupali’s management that the amount will remain blocked until further notice. The state owned bank’s year-on-year credit growth stood at 13.98 percent on December 31 last which is way above the 10 percent ceiling set by the central bank in September last year under a written agreement to stop the soaring rise in bank credit to businesses and to vested interest quarters.
But the bank’s audit early this year showed that Rupali Bank has crossed the limit and much of the loans appears risky loans while the bank is already suffering from bad loans and pressure for renewed provisioning against the bad loans. On March 10, the banking regulator directed Rupali Bank to deposit the amount it lent crossing the ceiling-to a blocked account as penalty. It is sort of a fine until the central bank will unlock the money.
As we know, similar penalty has been levied on BASIC Bank last month which is also a state owned specialized bank for crossing the credit limit it agreed in an agreement with the central bank. BASIC Bank was fined Tk 10 crore for breaking the limit. In fact the central bank is failing to restraint most state owned commercial banks-like Sonali, Agrani, Janata and Rupali– in advancing credit to business firms and individuals having influence in the government. Powerful ministers or ruling party men work from behind the scene to make available credits to such persons or businesses against their own financial benefits from such loans. In most cases, in fact the borrowers are either dishonest who use fictitious documents for the loan or wilfully turn out defaulters managing the rescheduling of the loan to keep it unpaid over the years.
We have seen that the Hall-Mark Group has used similar tactics to swindle the Sonali Bank or Bismillah Group used influential persons on the board to rub the BASIC Bank. Their liquidity position is now very poor and the need for provisioning is high to overcome the losses. The central bank has therefore asked all commercial banks and especially the state owned commercial banks to keep the credit growth under certain limits permissible by their liquidity position. But banks are often ignoring it under pressure from vested quarters. The central bank is now trying to tighten the belt against easy loans but we don’t know how far it will succeed. We ask the commercial banks to pay heed to the central bank’s guideline. The fining of banks may not pass good signals to clients. So we hold the view that the management personnel must also be dealt with otherwise including fining managers and board members who may have a hand in granting unworthy loans.
