Two state-owned banks fined for loan anomalies

Bangladesh Bank (BB) has imposed penalties of six lakh taka on state-owned Agrani Bank and Rupali Bank. Agrani Bank has been fined five lakh taka for providing undue privileges to a loan defaulter company's affiliated firm. On the other hand, Rupali Bank has been fined one lakh taka for hiding information about a loan defaulter client.

The banking and financial sectors of Bangladesh are in a bad shape according to financial sources and economists. Banks cannot term anyone as a defaulter in light of Bangladesh Bank's instructions due to the outbreak of ongoing coronavirus pandemic. Moreover, banks are not being able to recover loans from defaulters for the same reason.

Some senior bankers have told media on condition of anonymity that the country's banks would fall into an insurmountable abyss after the end of Covid 19. Sources affiliated with the financial turf have informed that the true extent of defaulted loans is over 2 trillion taka including written off debts though official figures show a smaller amount.

Allegations show that directors of different banks are taking big sums of loans from their banks violating regulations and thus they have made a mountainous form of irregularities. Most of these loans become defaulted credits at the end of the day.

Ahsan H. Mansur, Executive Director of Policy Research Institute and Chairman of BRAC Bank said that withdrawing the obligation of keeping provision for banks was a wrong decision. Banks should have preserved provisions. Provisions will be required while banks will be trying to recover defaulted loans, he further said.

Loans of 10 lakh 11 thousand 828 crore taka were distributed till December 2020. Out of this amount 94 thousand 331 crore taka became defaulted. It was 9.32% of the total distributed loans.

The government gave a special privilege to loan defaulters in May 2019 by allowing them to pay back their loans through a 2% down payment facility over a period of ten years at 9% loan interest rate. Defaulted loans of around 30 thousand crore taka have been rescheduled till March 2021 under this arrangement.

Around 75 thousand crore taka of defaulted loans were rescheduled in 2019. Moreover, banks have written off defaulted loans of nearly 50 thousand crore taka till March 2021.Influential loan defaulters get stay order on their defaulted loans and thus they skip the defaulter status. The authorities concerned have not yet unfolded the names and particulars of top borrowers.

Financial experts have said that corruption and irregularities in the bankingand financial sectors have all the likelihood to heavily affect the country's economy. Financial scholars have commented that the regulatory authorities including Bangladesh Bank could not do their duty properly which is why the load of defaulted loans is getting heavier day by day.

The huge scams by Fareast Life Insurance Company's ex chairman Md. Nazrul Islam have shaken the country's financial turf recently. But till now no significant action has been taken against him. It is being feared that Md. Nazrul Islam is most likely to leave Bangladesh like PK Halder.

Bangladesh Bank's information shows that the number of losing branches has increased of state-run banks like Sonali Bank, Agrani Bank, Janata Bank and Rupali Bank. Rajshahi Krishi Unnayan Bank is facing the worst situation. This bank's 246 branches out of 383 branches are counting losses.

Sonali Bank was asked to recover defaulted loans of 250 crore taka this year but this bank has been able to recover only 5 crore taka till June 2020. The number of losing branches of Sonali Bank has mounted from 27 to 50. Janata Bank was asked to recover defaulted loans of 1 thousand crore taka but this bank has been able to recover only 2.5 crore taka.

Janata Bank's losing branches have increased from 50 to 79. Agrani Bank aimed to recover 200 crore taka of defaulted loans but it has been able to recover only 6.5 crore taka. Agrani Bank's losing branches have gone up from 18 to 78.Rupali Bank targeted to recover 350 crore taka of defaulted loans but it has been able to recover only 1.5 crore taka. This bank's losing branches have escalated from 11 to 16.

Like defaulted loans, extensive money laundering has jolted Bangladesh's economy. Financial scholars have blamed extreme lack of good governance and accountability in the country's financial and banking sectors for the excessively rising figures of unlawfully transferred money from Bangladesh to foreign countries.

Swiss banks, Global Financial Integrity (GFI) and International Consortium of Investigative Journalists (ICIJ) have meanwhile unveiled reports about the formidable dimension of money laundering from Bangladesh.

GFI informed that 5270 crore dollars were laundered from Bangladesh during last seven years. On an average each year 64 thousand crore taka was illegally transferred from the country to overseas destinations in light of the figures presented by GFI. Bangladesh is one of the top 30 countries wherefrom most of the money laundering takes place.

Financial experts have referred to political duress and inefficiency of Finance Ministry and Bangladesh Bank as some more principal causes behind money laundering. In recent times it has been exposed by concerned sources that a powerful group of money launderers are making false shipment papers and fake invoices to facilitate illegal money transfer from Bangladesh to overseas destinations.

Under-invoicing and over-invoicing are another two ways utilized by financial perpetrators for transferring money to foreign countries through unauthorized channels. United Nations Conference on Trade and Development (UNCTAD) published a similar report in 2019.UNCTAD informed that most of the money laundering happens through false export and import documents. UNCTAD has also reported that the amount of laundered money in 2015 was equal to Bangladesh's 36% total tax revenue of that year.

Former adviser to caretaker government Dr. Wahid Uddin Mahmud told The Asian Age, "The authorities concerned should work hard to constitute good governance and accountability in the banking sector. At the same time it is essential to keep banks away from political influence."

Dr. Nazneen Ahmed, Senior Research Fellow of Bangladesh Institute of Development Studies said, "The government should take immediate steps to constitute good governance in all banks and financial institutions."Professor Dr. Abul Barakat, President of Bangladesh Economics Association, said, "The central bank and other regulatory institutions should carry out firm and uncompromising drive to recover defaulted loans to sustain the country's banking sector."

Dr. Zahid Hussain, former lead economist of World Bank, Dhaka Office said, "The regulatory authorities should not compromise with any bank or financial institution in case of graft and anomalies."Professor Anu Muhammad, Jahangirnagar University told The Asian Age, "Unbarred corruption and loan rackets are responsible for the rampaged plight of the banks and financial institutions of Bangladesh."