Published:  01:59 AM, 12 May 2019

Banking mess, financial stress

What is BB's duty, ask experts

Banking mess, financial stress

The banking and financial sectors of Bangladesh have been ensnared in mammoth corruption and irregularities for the last three years. Defaulted loans, money laundering, trade deficit, liquidity crisis, fall of share prices, et cetera, have cast a shadow over the country's economic prospects. Several banks have been undergoing acute liquidity shortage due to scams and anomalies.

The country's top business organizations have meanwhile urged the government to take immediate and effective steps to liberate banks from the ongoing rampage. Besides the business community, general depositors are also worried about the haphazard situation in the banking arena. Members of the Parliamentary Committee on Public Undertakings have expressed anger and concerns over these circumstances.

The Parliamentary Committee on Public Undertakings has raised questions about the roles and duties of Bangladesh Bank (BB). Renowned economists have also blamed Bangladesh Bank over its alleged failure to put a leash on the escalation of defaulted loans.

Finance Minister AHM Mustafa Kamal has meanwhile declared several privileges for loan defaulters to recover defaulted loans but even then the amount of mishandled loans is not coming down. Most of the banks are not being able to recover defaulted loans. Financial experts have commented that leniency like 2% down payment the Finance Minister has announced for the loan defaulters is most likely to lead to fresh drawbacks in the loan recovery process.

The sums relating to defaulted loans in the country's banking sector have more than doubled during the last five years. Defaulted loans have mounted by a whopping 133% in the meantime. Bad or irrecoverable loans amounted to 31 thousand 920 crore taka in 2013 whereas it rose to 74 thousand 300 crore taka in 2018.

The total sum of defaulted loans has reached nearly 1 lakh 44 thousand crore taka, including written off debts.   Bad loans refer to certain loans which have almost no likelihood of recovery. Financial experts have compared this scenario to uncontrolled financial rampage.

Economists have said that it is a reflection of the absence of good governance and the glaring presence of corruption and political influence all across the banking landscape.

Janata Bank is bogged down with 16, 300 crore taka in defaulted loans. Sonali Bank's defaulted loans have amounted to 11, 567 crore taka. Basic Bank's defaulted loans have reached 9, 344 crore taka. The sums of defaulted loans for other state-run banks are: Agrani Bank-5, 963 crore taka; Rupali Bank-4, 116 crore taka and Bangladesh Development Bank Limited (BDBL)-848 crore taka.

Among the private banks, Islami Bank Bangladesh Limited, National Bank Limited, United Commercial Bank Limited, AB Bank Limited and Social Islami Bank Limited are reeling with enormous figures of defaulted loans yet to be recovered.

Data from the Bangladesh Bank show that the sums of defaulted loans have increased by leaps and bounds during the last five years. Bangladesh Bank's former deputy governor Khondaker Ibrahim Khaled has said that it is a highly alarming situation. Such circumstances would put all banks at irreversible financial risk, he added.

Bad loans have jumped by 42 thousand 380 crore taka over five years. Economic scholars have stated that Bangladesh's economy is under grievous threats due to the malpractices going on throughout the banking arena.

Reportedly most of the top defaulters are in very close alliance with such regulatory authorities as Bangladesh Bank and the Finance Ministry. For this reason these defaulters do not care about any regulations, sources at different banks have said.

Allegations are there that influential defaulters utilize their political connections to breach banking codes every on a regular basis. Banks with high figures of defaulted, classified and bad loans are facing immense losses. As a result, the commercial banks find it very difficult to reduce loan interest rates to single digits.

State-owned banks are reportedly suffering most from the scourge of bad loans. Sources affiliated with banks have let it be known that 87% of the total defaulted loans has gone beyond recovery. In this way, the entire banking sector has gone into the vise-like grip of financial fraudsters, according to economists.

Defaulted loans and bad loans have had a broad number of banks into liquidity crises and capital deficit. Several banks are not being able to pay new loans to entrepreneurs for such reasons.

Tremendous sums of defaulted loans have led to money laundering, which is another financial worry for the banks.In the words of Khondaker Ibrahim Khaled, "Powerful political leaders often interfere with the functionalities of different banks. That's why most banks cannot take tough action against loan defaulters. The government should liberate all banks from political influence. Otherwise the existing chaotic state of banks will not improve."

Dr. Iftekharuzzaman, Executive Director, Transparency International Bangladesh (TIB) said, "Fighting corruption in banks is one of the biggest challenges for the government. A country cannot prosper in the midst of unabated financial irregularities."

Professor Anu Muhammad of Jahangirnagar University, told The Asian Age, "The regulatory authorities have totally failed to streamline banks. There is no accountability in the banking arena of Bangladesh."

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