'Banking sector reform goes missing from budget'

'Banking sector reform goes missing from budget'

The commitment made earlier to constitute a commission and reform the country’s ailing banking sector has gone missing from this year’s budget speech.

Finance minister AHM Mustafa Kamal has not said anything about reform of the banking sector in the recent proposed budget for the fiscal year 2020-2021.

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Don’t you know that the banking sector has turned good? All the influential people and defaulters are paying back their loans! That's why the issue of banking sector reforms has been dropped from the budget speech.
Ahsan H Mansur

The minister had announced the creation of a banking commission in the budget speech of 2019-20.

While unveiling the budget for the fiscal 2015-16, the then finance minister Abul Maal Abdul Muhit also made a commitment to form a commission to rescue the banking sector.

“Don’t you know that the banking sector has turned good? All the influential people and defaulters are paying back their loans! That's why the issue of banking sector reforms has been dropped from the budget speech,” Policy Research Institute (PRI) executive director Ahsan Mansur sardonically said.

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Why reform is necessary in the banking sector

Weaknesses in the operation and monitoring system have made the banking sector fragile. Several banks are in serious crisis due to unnamed and defaulted loans. Different organisations at home and abroad are worried over the state of the banking sector. Still the defaulters are being given various facilities, their influence has increased. A gloomy picture of the banking sector was recently exposed after Exim Bank managing director had been shot at by the owners of National Bank.

Ahsan H Mansur, who worked with IMF, said, “They will never come to the right track unless the government becomes strict. The defaulters have been given various facilities. Acts and rules have been relaxed due to their pressure.”

“A commission needs to be formed to shape the banking sector. Otherwise, the crisis will increase further,” the economist warned.

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According to the Bangladesh Bank latest report, default loans stood at Tk 943.31 billion at the end of December last year. Around Tk 2,000 billion had been rescheduled between 2012 and 2019. Moreover, defaulted loans of around Tk 560 billion have been written off. So the genuine default loans will be much higher.

Bangladesh Bank has appointed observers in 15 banks. But no improvement is taking place in these banks.

The finance ministry sources said more weaknesses in the banking sector may be exposed if a banking commission is formed. So the government is reluctant to take risks.

Bangladesh Bank former deputy director Khandaker Ibrahim Khaled said the current finance minister is friendly to the defaulters who have been given various facilities. “The depositors are not taken care of. So I don’t expect the formation of a banking commission.”

*This report, originally published in Prothom Alo print edition, has been rewritten in English by Rabiul Islam.