Following the ouster of the Awami League regime, one of the main tasks for the interim government was to reform the banking sector as it had suffered the worst damages during the previous regime.
The white paper formulation committee on the economic situation described the banking sector as a black hole and estimated the sector’s total distressed loans at an alarming figure of Tk 6.75 trillion.
According to the committee, the banking sector had been devastated under the Awami League regime, while a single business group acquired control over seven banks in collusion with the state agencies. Using this favour, a staggering sum of money was laundered abroad.
The central bank – Bangladesh Bank – is responsible for controlling inflation and regulating the banking sector. Here, the governor acts as the chairman of the board of directors and enjoys supreme authority.
Salehuddin Ahmed, who is now the interim government’s finance adviser, was the governor of the Bangladesh Bank on 6 January 2009, when the Awami League assumed power. He retired on 30 April of the year and was immediately replaced by Atiur Rahman.
However, Atiur Rahman stepped down as the Bangladesh Bank governor following a reserve heist in 2016. During his tenure, the central bank spurred controversies by approving new banks and rescheduling loans under political consideration.
Former finance secretary Fazle Kabir took up the governorship in the Bangladesh Bank following the departure of Atiur Rahman. Under his watch, multiple banks were grabbed by influential groups, while default loans were concealed by easing loan regulations.
In 2022, another former finance secretary, Abdur Rouf Talukder, was appointed in the Bangladesh Bank as its governor. Irregularities continued in the central bank during his time. The situation even exacerbated under his leadership as the central bank printed money to provide liquidity support to the looted banks.
Thus, the central bank turned into an accomplice in money laundering and other financial irregularities. Following the downfall of the Sheikh Hasina regime, Abdur Rouf Talukder went into hiding and resigned from his position.
Irregularities began during Atiur Rahman’s tenure
Atiur Rahman was appointed governor on 1 May, 2009. There was no significant political interference at the beginning of his tenure, but the central bank apparently relaxed its supervision in the banking sector. Taking this advantage, a loan scam, popularly known as Hallmark scam, took place in the Sonali Bank. The government later brought some changes in the Sonali Bank’s board as per recommendations of the central bank.
During his tenure, the central bank failed to prevent financial frauds in the BASIC Bank due to political pressure. In 2012, the central bank approved some nine new banks in favour of Awami League leaders, as per a list provided from the government’s high level.
In 2015, the central bank allowed loan restructuring in response to a letter from Salman F Rahman, an adviser of the Awami League President. Among the beneficiaries were Beximco, MR Group, SA Group, Ratanpur Group, Keya Group, Thermax Group, Sikder Group, Abdul Monem, AnonTex, and Jamuna Group.
During the trial of war criminals, a demand was raised to bring changes in Islami Bank. Instead of conceding to the demand, governor Atiur Rahman appointed four independent directors in Islami Bank to gear up its monitoring. It saved the bank for the time being.
However, his penchant for self-promotion and failure to address systemic fraud gave rise to controversies. He could not be reached for comments in this regard, while his phone was found switched off.
Bank grabbing and looting under Fazle Kabir
Atiur Rahman resigned from Bangladesh Bank after the reserve heist in 2016. Former finance secretary Fazle Kabir took over as governor on 20 March. During his tenure in the office, Islami Bank and Social Islami Bank Limited were taken over by the S Alam Group. Fazle Kabir approved these takeovers from his residence late at night. When rampant looting was taking place in the banks, the central bank relaxed its monitoring.
At one stage, S Alam Group officials began visiting the governor’s office and residence on a regular basis. They even interfered in appointments of deputy governors and other officials. In the aftermath, the central bank officials started depending on the S Alam Group to secure their desired positings.
The central bank approved some more banks under political considerations. It also started concealing default loans by relaxing loan regulations. The interest rate was kept at 9 per cent to benefit the businesses. To ensure continuation of the undue benefits, the business community exerted pressure on the government to retain Fazle Kabir in his position. The government later brought some changes in its policy to keep Fazle Kabir in the central bank as its governor.
When asked about the issues during an over-the-phone conversation, Fazle Kabir cut the connection, saying, “These are old issues. I will not talk in this regard.”
Printing money under Abdur Rouf Talukder
In July 2022, another former finance secretary, Abdur Rouf Talukder, was appointed governor. During his tenure, irregularities in loan disbursement continued unabated. He allegedly failed to take action against the irregularities and later turned into an accomplice of the unscrupulous traders.
During his tenure, the central bank printed money to a large extent to bail out the looted banks. The S Alam Group later funneled out the freshly injected money too, in the form of loans. At the same time, the central bank provided dollars to the pro-government businesses from the forex reserve.
Under his watch, the central bank restricted the publication of financial data and banned journalists’ entry to its offices. He went into hiding after the Awami League government’s downfall and later resigned from his position.
He could not be reached for comment as his phone was found switched off.