DEFICIENCY of corporate governance caused scams at some state-owned commercial and specialised banks leaving an adverse impact on the country’s financial stability. Due to the financial scams and politically motivated loan disbursement, five banks — Sonali, Janata, Agrani, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank – recorded 54.5 percent loan default as of December 2013. Reckless increase of non-performing loans put further pressure on the volatile banking sector. As a result the state-owned banks are performing badly and people are loosing their trust and confidence in the banking system as a whole.The volatile scene of the banks was unveiled in the Financial Stability Report published by Bangladesh Bank (BB) on Wednesday. The BB data showed that defaulted loans in the five state-owned commercial and specialised banks stood at Tk 22,107.05 crore against the total non-performing loans of Tk 40,583.01 crore. The BB report said, only 10 banks had held 48.20 percent stressed assets at the end of December 2013. Stressed advances in the 10 worst heated banks are higher because of lack of efficiency and transparency in the credit approval process, credit administration, credit monitoring and recovery and poor selection of borrowers, politically motivated lending, and negligence in risk management practices, the report further added.BB Deputy Governor said the recovery of bad loans would be more difficult if the banks failed to realise the loans in the shortest possible time. The banking sector will face more crises if the bad loans increase, he added. Warning the loan defaulters, Governor Atiur Rahman said the central bank would not give any type of waiver to any person, irrespective of his/her influence, for any irregularities. However, the central bank will strengthen its surveillance activities on the boards of directors of the scheduled banks as some banks are now facing a weak situation due to lack of good governance, and nepotism and corrupt motives of the directors.Meanwhile, admitting the efforts to reduce the number and rate of non-performing loans were dissatisfactory, Finance Minister AMA Muhith sought advice from the economists in another program in the city. The experts opined that to reduce non-performing loans, the loan appraisal procedure would have to be strengthened while more emphasis and greater discipline is necessary in the feasibility study for projects before sanctioning loans.After the loan scam of Sonali-Hall Mark and money swindling of BASIC bank, most banks are now more cautious in disbursing loans. Thus a state of stagnation in banking sector is surfacing which in turn has made the country’s economy sluggish also. It is expected that the banks, mainly the state-owned banks, should follow the rules and regulations with regard to loan sanction and realization. The banks, for their survival must downsize the volume of non-performing loans to the minimum and reverse their operational status to add strength to production mechanism. The government is not the true owner of the state banks, but the people of the country. People’s money cannot be wasted at the will or fancy of a few.
