Khondkar Ibrahim Khaled is a former banker. He was the managing director of several state-owned and private banks. He was also the deputy governor of Bangladesh Bank. He speaks at length to Prothom Alo about various issues of the banking sector.
When Khondkar Ibrahim Khaled worked in the banking sector back in the sixties, they had no idea about anything called ‘default loan’. Now the banks are weighed down upon heavily by the burden of default loans.
Talking about his experience, he said, “I was on training in Karachi in 1963, I had joined Habib Bank. During our training we weren’t taught much about loan default. Only towards the end there was a topic on default loans. In the afternoons we would be taken to the bank branch to see practically whatever we were taught. Someone had been given the responsibility to decide on which branch we would be taken. We would normally be taken to a mid-sized branch which wouldn’t be too crowded. But this gentleman couldn’t find single mid-sized branch where he could give us examples of default loans. It was decided that we would be taken to a big branch. That Habib Bank branch in Karachi said one of the loans had gone into default, but things had been discussed and it would be adjusted. So if we wanted to see it, we would have to go immediately. That was the first time I learn about default loans.”
He returned to Dhaka after the training. There were hardly any default loans in Dhaka either. “It seemed as if we were taught simply because it was in the text book. But once the country became independent, that is when I really got to understand what default was all about,” he said.
Initially, he recalled, there weren’t many default loans, but gradually these began to pile up. It was the rule that if a loan turned bad, Bangladesh Bank would default it. Then it was said that if a loan was not recovered in a particular span of time, it would go into default. And now almost all loans are defaulted. It is a matter of luck if a few good loans are found. “This was a new experience for me.”
The World Bank formed a team of officials from Europe and America....They worked for five years and vastly improved the banks. The moment they left, the loan default simply went back to where it was
Coming to his post-independence experience, Khondkar Ibrahim Khaled said, “I used to work in Habib Bank before. After the country became independent, I had the opportunity to work in quite a few banks. In Habib Bank, one would have to go through a lot of processes to get a loan. The officer would have to sign a document saying he was satisfied with everything and then granted the loan. If for any reason the loan turned bad, that officer would be under pressure to recover the loan. In fact, in some cases a portion of the loan would be recovered from that officer. There was a personal liability.”
The former banker observed, that sense of liability had diminished after the independence of Bangladesh. It was as if no one was bothered who approved the loan, who recommended it or who disbursed it. No one is held liable.
“It all began in the eighties, during the rule of General Ershad,” said banker Khaled. “The financial sector reform programme was taken up under the World Bank. The World Bank formed a team of officials from Europe and America. They were given responsibility of every bank. They worked for five years and vastly improved the banks of the country. The moment they left, the loan default simply went back to where it was. That shows we do not want to go by any rules or regulations, not even the highest authorities. That is the basic problem.”
When asked about how successful he was in curtailing default loans and other irregularities during his banking career, the former deputy governor of Bangladesh Bank said that he had been quite successful in cutting down on loan default when he was with Sonali Bank and Agrani Bank. “If a managing director wants, he can do it, unless there is some intervention. During my time, there wasn’t so much intervention.”
He went on to say, “In 1996 Awami League was in power. The government wouldn’t directly interfere with the banking sector as it does now. There were requests and lobbying then too, but not from so high up as now. It was from the mid-level and we could resist. If anyone tried to force our hand, we would also take action.”
“For example,” continued Khondkar Ibrahim Khaled, “I joined the central bank when Lutfur Rahman Sarkar was governor. A businessman, close to the centre of power, once insulted him and even grabbed him by the collar. Lutfur Rahman Sarkar rushed into my room, and the businessman by then had left. He informed the finance minister Shah AMS Kibria and a few others about the matter.
The man eventually had to come to Lutfur Rahman Sarkar and apologise. It was because we were active that he had to apologise. SAMS Kibria was a very straight speaking man. But that man was even more powerful, no one could stand up against him, let alone the governor. But it all depends on how actively one deals with such matters. Those who are in Bangladesh Bank are simply not capable of complaining to the top level.”
Examples were placed before Khondkar Ibrahim Khaled about a bank board being taken over during his time and, more recently, a bank MD being shot at.
“I was deputy governor then,” he recalled, “I heard about shooting at a bank’s board of directors. The police were called and the incident was proven to be true. The governor at the time, Farashuddin, simply dissolved the board without consulting anyone. We did so in a matter of half an hour, following all legal procedures."
Minister Kibria called and said, ‘You could have called me before dissolving the board.’ I replied, ‘Then we wouldn’t have been able to dissolve it. You are in politics.’ He then asked, ‘Will you suspend you decision?’ I asked him to speak to the governor. The governor told him the decision would not be suspended otherwise Bangladesh Bank would be non-existent. Bangladesh Bank can’t simply watch out while the board of a bank is embroiled in such clashes.”
“You see,” the retired banker pointed out, “We did so many things and have survived. No one lost their job, no one said anything, though it was obvious that certain people were displeased.”
He said that many such incidents took place, even more serious. But the central bank never dared to dissolve the entire board of a bank. “It is still possible to do what we did,” he asserts, “I believe no political government will obstruct any decision of the governor.”
At a certain event, Khondkar Ibrahim Khaled had remarked in the presence of the finance minister that the central bank was in the grips of a mafia. Why had he made such a comment?
“I made this comment to catch Mr Kibria’s attention, actually,” came the reply. “I was the MD of Sonali Bank at the time. He was not happy with my remark and said that I could have made the comment to him in private, rather than in public. Later when he met me again, he asked whether I was annoyed. I said I was wondering whether he was annoyed. He said, ‘I am a minister, naturally I was a bit upset. But what you said is very true.’”
Asked why he made such a comment publicly, Khondkar Ibrahim Khaled said he had been the Sonali Bank MD at the time and the CBA there was really rough. Former secretary Asaf-Ud-Dowla was the chairman. Atiur Rahman and Khushi Kabir were directors. The CBA would often come to the board and make all sorts of demands and create disturbance. That was why I had spoken out. The finance minister took it into cognizance. The CBA mafia would take money to arrange for transfers and promotions. The mafia nowadays isn’t involved in such small tasks. The mafia now take loans of billions of taka, with no intention of returning. A portion of that money is shared among certain others. Such mafia are increasing by the day.
Coming to the present, the example of BASIC Bank and a few private banks is raised. Khondkar Ibrahim Khaled said that after the government appointed a political person as BASIC Bank chairman, the bank’s default loans shot up from 1.5 per cent to 80 per cent. It was just because of the chairman and the MD that the bank faced such a predicament.
The government should have held someone liable. After all, a branch manager of the bank couldn’t be responsible for the defaults scaling up to 80 per cent. A bank cannot fall into such dire straits unless the chairman and the MD are at fault. But the chairman is wandering around free.
He says, “The Anti-Corruption Commission reportedly called him twice for a cup of tea and that’s it. So whoever is protecting him is more powerful than the corruption watchdog. No action has been taken against him till now.”
He then turns to Farmers’ Bank. This private sector bank was given to Mohiuddin Khan Alamgir who was also a minister. The bank sunk so low that it couldn’t pay back the depositors their money. It was going bankrupt but the government bailed it out. It made Sonali Bank, Agrani Bank, Janata Bank and Rupali Bank pour in capital. That is fine, but won’t those who took the bank to the brink of bankruptcy be punished, he asked.
He said, “No one questioned the chairman. As I said, there is no accountability. Mahbubul Huq Chisti was caught as he was the vice chairman of the bank, but was he responsible alone? Surely many others were involved.”
So where is the problem?
The former deputy government of the central bank replies that the problem is the absence of accountability. “The basic tenet of good governance is accountability, liability. Unless this is established, there can be no good governance.”
He gives an instance of five members of a family being on the board of a particular private bank, though the law allowed only two members of a family to be on the board of a bank at the same time. Atiur Rahman was the central bank governor at the time and a letter was issued to the bank. The bank didn’t even bother to reply to the central bank’s queries. Instead they complained at a high level and the government amended the law to accommodate four directors from the same family. Those five members of the same family are still on the bank board. Bangladesh Bank doesn’t even look in that direction.
There is no problem in extending the age limit, but it is not correct to change the law for this purpose. That will make the governor entirely obliged to the government. He will have to compromise.
“Actually all political leaders must behave rationally,” he said, “Nowhere else in the world are laws amended to allow violation of the law.”
After 2009, political leaders, activists, even leaders who had lost in the election, were appointed as chairmen or as directors to various banks. Then the banking sector saw one scam after the other. Evaluating this situation, Khondkar Ibrahim Khaled said, these changes have been bought about basically to politicise the banking sector.
“But banks are not a place for politics. Ten per cent of a bank’s funds belongs to the owner or the government. The rest is all public deposits. Bangladesh Bank is responsible for protecting the people’s money. That is why there is so much pressure on the central bank, so that it looks after the interests of the looters rather than public interest. That is the ugly truth,” said Ibrahim Khaled.
“There is no one to uphold the interests of the depositors,” he continued,
“If there was anyone, the BASIC Bank chairman would be punished. So in exchange of what is he being protected? He is no one’s relative, so has he given a share of the BASIC Bank’s loot to anyone? Or else why is he being shielded? The nation must be given a reply to these questions.”
He said that this has given rise to the assumption that a share of the money being looted from the state-owned and private banks must be going to certain quarters within the government and that is why they are being protected. This quarter within the government is not protecting them for nothing, he concluded.
Does that mean the banking sector is an area to mete out political favours?
Money is more powerful than position, the former banker replied. Money is the driving force of politics. Good politicians would never behave in this manner. But good politics has not been established in the country, not in any of the parties. And it’s all about the money from the banks.
The law was amended to keep the Bangladesh Bank governor in office. How does Ibrahim Khaled view that?
Ibrahim Khaled said there has been precedence of this during the rule of the BNP government. The chief justice had one time been with BNP and the BNP government extended the retirement age of judges to 67 years to retain him in office. Now after a long time, Awami League is doing the same. There is no problem in extending the age limit for a post, but it is not correct to change the law for this purpose. That will make the governor entirely obliged to the government. He will have to compromise.
Previously, when reports of irregularities appeared in the media, action was taken. Now the focus is more how the news was leaked to the media. What is Ibrahim Khaled’s experience in this regard?
He agrees that in the past if any such report appeared in the media, an inquiry was launched immediately. Now measures are taken so these irregularities are not exposed. That means those who are committing the misdemeanours are extremely powerful. It will be difficult to break out of this circle and restore a healthy environment in the banking sector. The government must have the intention from a top level to fix the sector, but there are no signs visible.
Commenting about his recent appointment as chairman to Intentional Leasing which had been looted by Prasanta Kumar Haldar, Khondkar Khaled Ibrahim said the Supreme Court judge had thought he would be able to do the difficult task. “In fact, I did carry out a lot of work, but PK Haldar and his associates had already looted money from the company and siphoned off some abroad. So unless PK Haldar is brought back to the country, nothing can be done. This will need a huge amount of effort and hard work which is not possible for me at my age. That is why I stepped down. The new chairman Nazrul Islam is a very competent man. He will be able to complete my unfinished work.”
The banking sector can be fixed only if the government wants, otherwise not
Khondkar Khaled Ibrahim agreed that PK Haldar, no matter how crafty, couldn’t have pulled off the scam without being aided and abetted by certain powerful quarters. He said these quarters must be identified and exposed. “I hope the Anti-Corruption Commission does this, but given the prevailing circumstances, that does not seem likely.”
He elaborates, “The scenario I have witnessed is terrible. Bangladesh Bank does not want to admit it but there are at least five financial institutions that are in extremely bad condition. All their money has been looted. Bangladesh Bank had failed to supervise these institutions. It has taken no action.”
He said that many were of the view that persons within the central bank were in collusion with PK Haldar. “It is obvious that such a big scam can’t be carried out without support from within the central bank,” he contended.
So what should the role of the central bank be at present?
He is blunt, “The officers of the central bank are performing in the manner that they have been groomed. With just a 2 per cent deposit, default loans are being regularised. The circular in this regard was not prepared by the central bank, it just signed it. It was written by someone who doesn’t even know good Bangla. It was written in English and the central bank translated it. It was sent to the central bank via the ministry. If the central bank cannot prevent this, then there is no way to improve the banking sector.”
He said there is no one of strong personality in the central bank. There were many officers of strong personality before, but the government will not appoint such persons. The government must decide not to intervene politically into institutions like the central bank, the Anti-Corruption Commission, the public service commission and so on. The government claims that it does not intervene, but it is obvious that it does.
So how should the banking sector operate?
“The first precondition for the banking sector to run properly is political commitment from the highest level. Authority can be delegated, but responsibility cannot,” he said, adding, “If competent and correct governors, deputy governors and MDs are appointed, a lot of good can be done. Now five owners of the banking sector collect funds and donate it to the government’s relief fund. It is hardly significant funds for the government, but it has created a bad impression among the people. Meanwhile, the bank owners imagine they have bought the government and run their banks accordingly.”
He admits that not all bank owners are bad and says 90 per cent of them are good. He said the government would be advised well if they consulted the good directors rather than the bad ones. And rather than collecting money for government funds, the bank should take measures to protect the interests of the depositors. He concludes, “The banking sector can be fixed only if the government wants, otherwise not.”
*This interview has appeared in the print and online editions of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir