NEWS reports said that the Bangladesh Bank has decided to monitor the business performance of big corporate bodies in a bid to secure the stability of the country’s financial sector. The central bank has started formulating policies to that end to bring the corporate bodies – 40 to 50 in the first instance and set separate recommendations for compliance considering their business risks. The question is whether it is the right or wrong step. Bangladesh Bank has justified the move in view of the fact that over 20 banks have so far incurred heavy losses due to their exposure to some big corporate groups, mainly based in Chittagong as they have failed to repay loans in time. The banking sector exposure to single borrowers is thus poising bigger threats to the stability of the country’s banks and non-bank financial institutions. Under the new plan, the central bank will keep a constant watch on their business performance, product brands and asset quality to make sure that banks are not going to get suddenly stuck up in bad loans. The matter has assumed more significance with a growing number of big business houses who are borrowing from foreign banks.
Under the Bank Company Act of 1991 the outstanding amount of borrowing exposure – both funded and non-funded loans – to a single person, counterpart or a group should not exceed 35 per cent of the capital of a bank. But in most cases the limit was exceeded by many banks to invite troubles at their end. Moreover borrowing from external sources by big corporate houses may bring about new challenges to the country’s financial sector in case they fail to maintain the repayment schedules. So the need for monitoring made a strong case to keep a watch on the proper utilization of loans and so that early warnings can be sent to lender banks if any borrower lands in trouble.
As we see, the Bangladesh Bank’s move will essentially intrude into the business efficiency of big houses which is not consistent with the principles of a free market economy.
The truth is Bangladesh Bank miserably failed and could not monitor the activities of the corrupt bank managements. In a country of good governance action would have been taken against Bangladesh Bank itself.
We do not want to see big companies are being harassed by corrupt bank officials for pursuing the greed of personal gains. Let Bangladesh Bank monitor its own failures first.
