‘Tk 1,000 defaulter lands in jail, but Tk 100b defaulter stays by govt’

Mohammed Farashuddin speaks at a discussion in Dhaka on 2 May, 2024.Prothom Alo

Mohammed Farashuddin, a former governor of Bangladesh Bank, has lambasted the government for its reluctance in taking action against the giant loan defaulters and enthusiasm in punishing the minors. 

“A staggering $7 billion is being siphoned off annually, but nobody speaks about it. The government keeps mum, and the International Monetary Fund (IMF) also mysteriously refrains from commenting on it,” he said while addressing a programme organised by the Economic Reporters Forum (ERF) in Dhaka. 

He observed that loan defaulters, tax evaders, and money launderers fall on the same line. They will return the money only in the face of strict stance by the ruling block. 

“Someone lands in jail for a Tk 1000 agricultural loan, while a defaulter of Tk 100 billion industrial loans sits next to the government. Now, the more powerful a person is, the bigger the defaulter, and the higher their interest waiver.” he mentioned. 

Regarding the interest waiver privilege, the former governor said, “The interest waiver began in 2003. If I had the power, I would cease the waiver facility right now. And, when someone influential will be able to convince the government that the way to reduce inflation is collecting defaulted loans… and if the government heeds it, inflation will come down. It is a matter who will make the government understand.” 

During his speech, he also shared his perspectives in detail on some other burning issues, including merger of banks, dollar crisis, discrimination, inflation, money laundering, and the central bank’s role. Besides, he responded to various queries from journalists. 

Merger of banks 

Mohammed Farashuddin said merger of banks is a common phenomenon across the world. It should be done with the consent of both parties, rather than by force.

He, however, noted that merger is not the only way to turn a troubled bank into a good one. There are alternatives. There are four banks among the good ones that the Bangladesh Bank once transformed to good condition through its supervision. 

Over the prevailing concerns over the closure of banks in Bangladesh, he said banks are frequently being closed abroad. To address this, the amount of deposit insurance needs to be increased from Tk 100,000 to 10 million. Then the depositors will gain confidence and keep money in banks instead of at home. Besides, all obstacles on the way to make three to six-month deposits should be removed. Also, it is not a good method to swap taka with dollars. 

Recalling the previous glory of BASIC Bank, he said, “BASIC Bank, as the only government bank, once contributed profits to the government. Its establishment was aimed at fostering entrepreneurs. Gradually, it has been transformed into a bad bank.” 

The Rajshahi Krishi Unnayan Bank (RAKUB) was established to bolster agriculture in North Bengal. If it is merged, the agriculture of the region may plunge into a tight corner. It would not be wise to merge the Bangladesh Development Bank Limited (BDBL) as the bank is still relevant to provide project loans. The central bank may consider it, he added.