AS per a news report in an English daily the newly set up six commercial banks are now running aggressive banking sanctioning huge loans to individuals and business bypassing central bank’s guidelines. They are doing it when other banks are sitting on idle funds by avoiding fresh loans considering the country’s fragile and risky investment climate at the moment. However the lending spree of those banks prompted Bangladesh Bank on Sunday to issue a warning asking them to restraint from such reckless lending in the light of money laundering by vested interest quarters from other banks using fictitious business and request for project loans. Dishonest business houses robbed Sonali Bank and BASIC Bank and the risks are everywhere. Reports said the central bank has asked the management of Farmers Bank, Midland Bank, Modhumoti Bank, South Bangla Agriculture and Commerce Bank, Meghna Bank and Union Bank not to disburse loans against poor mortgage and other collaterals that may prove fatal to their financial health at the end.
We believe that Bangladesh Bank’s warning has come at the right time when the advance-deposit ratio of those banks is closer to cross the safe limit set by the central bank. It is time they must take cautionary steps and restraint from aggressive lending. We must say banks operate on competitive business environment but when it is missing in the country at the moment, they must exercise their self-restraints by going for low cost deposit and less risky shortterm investments. Because wrong decision in lending or faulty loans to any business may cause spill over of their bad loans and this may in turn cause a run of the banks’ capital. Such banks may ultimately lose sustainability and its overall negative impact on the banking sector will be disastrous, besides depositors in those banks may end up losing their fund.
It is already noticeable that some new banks have set up many branches in the districts, but they failed to expand business to the expected level. It means their cost of management is rising compared to the rise in deposits. They are therefore coming under criticism as to how they would be able to earn enough profit to meet the growing expenditure and a good governance from within. The fact is that almost all these banks are owned and launched by influential ruling partymen in 2012 and they are not ready to listen to the good advice of the central bank or adhere to its regulatory measures for their short-term gains.
We think all banks are integral part of the national economy, both in the private and public sectors and they must therefore listen to the alarm signals when they have come closer to greater risks. There can’t be any room for aggressive banking at the cost of their sustainability at the end.
