The measures taken so far in the bank and financial sector have managed to keep the crisis in control. But the problems haven't been resolved entirely. The banks' boards of directors have been dissolved, thus halting embezzlement. The doors have been closed on siphoning money out of the banks through underhand means. The fall in foreign exchange remittance has also stopped.
Now the next steps in the banking sector must be taken in the shortest time possible. The confidence of the clients must be increased. After all, client confidence is the greatest asset of the banking sector. Certain measures may be taken into consideration:
1. A decision must be taken on the banks that are riddled with problems and that cannot recover or do not have the capacity to meet the demands of the clients. The decision, depending on the condition, can be either to go for mergers or for liquidation. After all, as long as these banks exist and cannot pay the clients their money, the unrest will increase. This will gradually have an impact on the good banks. So a decision must be taken as to whether these banks will remain like this or be shut down.
2. It is not good for the clients to face such sufferings indefinitely. Bangladesh Bank must devise a way for those who want to withdraw their funds from the bank. Or the depositors can go to court, file a case and demand compensation.
3. Based on policies adopted worldwide, Bangladesh Bank can draw up a policy for liquidation and mergers.
4. Measures should be taken in increasing credit flow in the private sector. It is certainly alarming that this has slumped at present. If loans decrease in the private sector, this is seen as an indication of stagnation in the economy. Alongside controlling inflation, we must look into economic growth too. Adequate credit flow in the production sector needs to be ensured.
5. Default loans increased during the Awami League government's rule. Steps must be taken so this does not increase all over again. If default loans cannot be addressed, then it will not be possible to emerge from the crisis in the banking sector.
6. Concerted efforts are required for reforms. A roadmap for short and mid-term loans must be drawn up so that Bangladesh bank can immediately take up measures for short-term reforms. Some reforms will have to wait for a political government to be installed as these require changes in the law.
* Mustafa K Mujeri is former chief economist, Bangladesh Bank