Restoring trust in the banking sector will be tough

We hope the government policymakers will realise the significance of what the economists and experts have said about the country's economy, especially the banking sector, in a dialogue organised by the research organisation Center for Policy Dialogue (CPD). First of all the government must acknowledge the problem. Secondly, effective steps should be taken to solve the problem. But the government has a tendency to show that everything is going well. Such tendency of the government can bring grave consequence in the future.

Renowned economist and member of Bangladesh's first planning commission, Rehman Sobhan compared the prevailing economic crisis to cancer. Cancer spreads from one part of the body to different parts. He commented that the current situation has arisen due to structural problems, lack of good governance, not adopting reforms on time.

According to the government, the country currently has Tk 1.34 trillion default loans. The actual amount of default loans is much higher. Other economists participating in the dialogue also underscored the problems of the banking sector and said that political influence has been facilitating misappropriation of the bank money. Money of default loans and illegal income is being laundered.

Politicians, bureaucrats and businessmen are involved in this. Evidently the political influence on the banking sector is wider than ever before. At times the central bank also had to play silent spectator. Following this, economists and businessmen demanded the formation of a bank commission, but the government did not take it into account. But an opposition lawmaker likened the misappropriation in the banking sector to that of the East India Company. This link is not unreasonable. Just like the East India Company, as media reports, numbers of loan defaulters have also siphoned large sums of money abroad.

In the dialogue, planning minister MA Mannan assured people that the economic crisis will end and the inflation will also dip. The condition of government banks has been deplorable for many years. The provision that allows four members of one family in the board of directors and one director remaining in the post for 9 consecutive years has brought many private banks to the brink of collapse.

The  banks turned into family-controlled institutions. On 24 November, Prothom Alo published a report 'Nasty November' for Islami Bank’, igniting a stir across the sector. Around Tk 24.6 billion was disbursed as loans from the bank in November alone.

Around Tk 95 billion suspicious loans were disbursed from three banks. After that, the government's policy makers were somewhat dazed. The central bank also imposes a few restrictions on the transactions of some banks. Amid the relentless anarchy in the banking sector, such periodic steps do not seem to bring any success. We see, unfortunately, political pressure in the banking sector as well as the influence and pressure of big business groups is becoming stronger than ever. Eventually, those elements succeed to change many things.

There is an apprehension that the defaulted loans in the banking sector will increase further ahead of the national elections. To participate in the election, many reschedule the loan by paying 2 per cent. This rule needs to be abolished.

As government policymakers claim, banks are not short of money, but there is a lack of trust. And this trust can be restored only when there will be discipline and good governance in the banking sector and the family-control comes to an end.