The Cabinet has amended the Bank Company Act. The Bank Company (Amendment) Act 2023 was approved by the Cabinet on Tuesday. In light of the amendment, no more than three persons from the same family can be appointed in the board of a bank.
The Cabinet meeting was presided over by Prime Minister Sheikh Hasina which was held in her office. Cabinet Secretary (Coordination and Reforms) Md. Mahmudul Hossain Khan conveyed this information to journalists at the end of the meeting.
According to the existing law, four persons from one family can stay in a bank's board of directors. However, this provision has been changed. From now on no more than three persons from the same family can be put in a bank's board of directors.
Banks strapped for cash are now struggling to keep up the mandatory daily cash reserve ratio with Bangladesh Bank, meaning they won't have cash quickly available if customers want their deposits back. Moreover, most of the banks have crossed around 95% of their advance-deposit ratio (ADR). Under these circumstances, the country's banking system may collapse if the situation cannot be reversed right away.
Most of the banks are suffering from acute liquidity crisis. Banks are not being able to pay for opening letters of credit (LCs). Even most of the banks cannot pay import bills for daily essential items like sugar, edible oil, chickpeas, dates and dry foods while the month of Ramadan is coming up shortly.
Lack of foreign currencies, particularly shortage of dollars is also badly affecting the financial and banking sectors. It has been observed that state-owned Agrani Bank distributes 58% of dollars in the market while the rest of the banks issue the remaining 42% dollars.
Economists have stated that Bangladesh Bank should provide 75% financial backup to banks which have unclassified loans.
The magnitude of defaulted loans in 15 banks has soared in an alarming way. From 10% to 99% of the distributed loans of these banks have become defaulted credits. Another 9 banks are suffering from defaulted loans of more than 5%. Bangladesh Bank has decided to send letters about this matter to 22 banks shortly. Bangladesh Bank seeks to know what steps these banks have taken to recover defaulted loans.
9 state-owned banks, 5 private banks and 1 foreign bank are bogged down with high sums of defaulted debts.
Among state-run banks, Basic Bank is inflicted with the highest amount of defaulted loans which is 58.62%. Bangladesh Development Bank Limited's defaulted loans are 35.61%. Janata Bank Limited's defaulted loans are 18.98%. Sonali Bank Limited's defaulted loans are 17.96%. Rupali Bank Limited's defaulted loans are 14.90%. Agrani Bank Limited's defaulted loans are 14.07%.
Rajshahi Krishi Unnayan Bank's defaulted loans have reached 15.15%. Probashi Kallyan Bank's defaulted loans have reached 12.75%. Bangladesh Krishi Bank's defaulted loans have amounted to 10.27%. ICB Islamic Bank is encumbered with the highest rate of defaulted loans which is 78.54% as far as private banks are concerned. Bangladesh Commerce Bank's defaulted loans are 47.60%. Padma Bank's defaulted loans are 63.25%. National Bank's defaulted loans are 13.45%. AB Bank's defaulted loans are 13.97%. One Bank's defaulted loans are 8.61%. Uttara Bank's defaulted loans are 6.96%. Standard Bank's defaulted loans are 6.9%. IFIC Bank's defaulted loans are 5.96%. Mutual Trust Bank's defaulted loans are 5.47%. SBAC Bank's defaulted loans are 5.30%. Bank Asia's defaulted loans are 5.2%. National Bank of Pakistan's defaulted loans are 98.99%. Habib Bank's defaulted loans are 9.86%.
A broad number of banks are facing capital deficit due to big amounts of defaulted loans.
Bangladesh's banking sector has been going through immense corruption and irregularities for last several years. Officially there are defaulted loans of 96 thousand crore taka but unofficial financial sources have informed that banks are inflicted with more than 2 trillion taka defaulted credits. Economists have stated that some unscrupulous quarters have rampaged the country's banking and financial sectors through defaulted loans and money laundering.
Most of the banks have failed to recover defaulted loans from influential borrowers. Powerful loan defaulters get stay order on their loans and thus they skip the loan defaulter status.
Financial experts have blamed corruption, irregularities and political influence on the banking arena for this alarming scenario. Economists have further said that regulatory authorities like Bangladesh Bank and Finance Ministry have not been able to play their roles properly which is why the sum of defaulted loans has been mounting years after years.
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