IN any matrix of measuring the present banking scenario, no hope is, perhaps, left for its immediate recovery from the downfall. An English daily reported on Thursday that the overall economy is stumbling due to the recent banking scams. The reports added that ‘bad and default’ loans are on the increase – thanks to the scams in the state-owned national banks. With little scope of lowering interest rates, no halt in the declining index of private investment seems likely and thus, no bar is enough to stop capital flight. Bangladesh Bank in a report submitted to the Parliamentary Standing Committee blamed the soaring cost of funds as the consequence of high interest rates that ultimately results in an investment crunch, unemployment and inequitable social development. Despite serious efforts taken by the central bank, the upward affinity of interest rates could not be managed due to a rise in default loans in the backdrop of an unprecedented swindling of funds in the state-owned banks.
We are worried about the awful situation of the prevailing banking irregularities that emerged in the backdrop of scams in the Nationalised Commercial Banks (NCBs) such as Hall Mark, Bismillah Group or the recent rip-off in BASIC Bank. Around Tk 7,000 crore has been swindled from the state-run Sonali Bank and BASIC Bank, which eventually became classified loans, in the last two years. These led to over-sized increase of bad debts in the banking sector. The consequence is there is less money available in banks to lend to the private sector in particular. The report said, the default loans in the banking sector increased by Tk 7,589.15 crore in the first three months of this year despite the relaxed policy of Bangladesh Bank on loan rescheduling on the ground of pre-polls political unrest. The major default borrowers are the government sectors State-owned Enterprises (SoEs) where financial corruption is incredibly high. It pushes up the cost of funds for which BB cannot lower the rate of interest (RoI) despite attempts to reset it. We share the concern of the experts that the overall banking sector is facing a critical time following a series of mismatches in the state-owned commercial banks.
After the incidents of the plunder of funds from the banking sector in the last couple of years by persons enjoying political patronage, merely conducting a so-called study by the Bangladesh Bank is not enough to reassure us. The shadow of mistrust among the clients so-created is not easy to remove. Surprisingly, the big fishes in the government functionaries are far off from facing any trial. The looters thus are encouraged to send their illegally earned capital out of the country, to places like Swiss banks or to make second homes in Malaysia, USA, Canada or UK with the plundered amounts.
The government must demotivate itself from its intent to politicise the bank’s boards. It must induce professionalism in banking for the sake of all-inclusive economic growth of the country, more so to restore public trust in the banking system of the country.
