MEDIA reports said that the central bank has appointed four observers to four state-owned banks (SOBs) to monitor their loan portfolio operations and bring improvement in their management as they are on the brink with defaulted loans. But will they be able to deliver. These banks such as Sonali, Janata, Rupali and Agrani have become riskier with scandalous loans blurred by poor governance and management-failure in the hand of a section of highly corrupt officials enjoying political impunity from powerful quarters. These banks with tens of thousands small to big depositors and shareholders need to be protected but the government appears to be reluctant to restore discipline in their loan operations to fulfil demand for loans of powerful people around the ruling establishments.
As it appears big loan frauds in SOBs took place over the past years mainly through the hands of government appointed directors on political consideration in which senior bank officials collaborated. The SOBs alone lost over Tk 12000 crore to influential borrowers in three years who used fake trade documents for the purpose. Now big loan rescheduling is equally playing in the hands of the powerful sending the banks on the brink.
The economy is the worst sufferer from huge defaulted loans for shortage of loanable funds. Banks are demanding high provisioning against bad loans. The high interest rate on new investment is impacting the expansion of the economy including job creation and income generation activities.
The appointment of the observers, who are four executive directors of Bangladesh Bank, came after the International Monetary Fund (IMF) has raised the issue again with the government demanding reforms of public banking and steps to recover bad loans. As per the central bank’s figure total outstanding of the four SOBs stood at Tk 26.92 crore as of June this year and their advance to deposit ratio stood at 52 percent against 76 percent for 39 private commercial banks. The government has repeatedly injected thousands of crore taka into the SOBs; but the fate of those scandal ridden banks appears to be as grim as before.
Question arises as to whether the four observers to the SOBs will have any effective control over those banks as against the powerful directors representing the government on their Boards. The central bank has also appointed an observer to the scandal hit BASIC Bank but he had miserably failed to improve the management performance and stop its former Chairman from approving fictitious loans against fake trade documents.
We welcome every step to restore discipline in public sector banking but many fear whether the government wants it other than using such measure as an eye wash to mislead the people. We held Bangladesh Bank responsible for every wrong-doing in the SOBs but hope that it will honestly try this time to put a brake on misusing those banks.
