The government has spent over Tk 160 billion of taxpayers’ money in the past nine years to fund operations of the state-owned banks.
This is the period when the banking sector was jolted by a series of scams involving billions of taka and when default loans too rose to a record high.
Mismanagement, corruption and politicisation are widely blamed for the unusual increase in default loans.
Records show the Hall-Mark loan fraud involved more than Tk 40 billion, and the BASIC Bank scam cost Tk 45 billion and that of Janata Bank Tk 55 billion.
The amount of default loans of four state-owned banks -Sonali Bank, Agrani Bank, Janata Bank and Rupali Bank -stood at about Tk 290 billion in 2017, according to official statistics.
Former governor of Bangladesh Bank Salehuddin Ahmed has assigned the banks’ ‘exposure to a single borrower’ in most cases as a key reason of swelling of default loans.
“Scams are taking place in the banking sector one after another and everyone knows who are doing what and how… When nothing happens to the culprits, others are encouraged to do the same and it turns into financial contagion,” he told Prothom Alo in an interview.
The aggregate amount of default loans with the banking sector as a whole stood at more than Tk 800 billion, said a central bank report in last year. The amount was Tk 224.81 billion until 2008.
The amount of written-off loans was around Tk 450 billion as of 2017.
So, the actual default loan amount in the country's banking sector, including that of written-off loans, is much higher - and it had surpassed the Tk 1 trillion-mark for the first time in 2016.
To make up for the state-owned banks’ losses caused by default loans and scams, the government has increased its budgetary allocations for them over the years. Such allocation, if not actual spending, was Tk 10 billion in 2009-10 and Tk 50 billion in 2012-13. The current fiscal year’s allocation is Tk 20 billion while the actual spending will be available at the end of the fiscal.
Like previous years, it is set to allocate significant amount from the next fiscal year’s budget to support the ailing public sector banks.
“Allocation of money for the banks in the budget is a legal process. The law says if the paid-up capital decreases, the owner will fill it up. Since the government is the owner of the state-owned banks, it is legally bound to so,” said former deputy governor of the central bank Khondkar Ibrahim Khaled.
“But, before this, the government has another duty. It has to operate the banks in such a way so that there is no deficit of provision. The government has failed to do so,” he said.
The government has in the meantime failed to punish the ‘culprits’ involved in loan defaults or loan scams to set an example for others.
“Since the failure of the government, be it mismanagement or corruption, is primarily responsible for this situation, using tax payers’ money to fill up the deficit of banks’ provision is an immoral practice,” added Ibrahim Khaled.