The banking sector is in a precarious position. It should not have been in this predicament. However, for quite some time now, particularly after the present finance minister took office, the decisions taken in the name of reforms, have been more deforming than anything else. These decisions have been taken in the interest of certain vested quarters, leading to the present state of affairs. The banks are taking steps to cut salaries, lay off employees and so on. The financial condition of the banks is deteriorating.
It is not that the banks were doing excellently during the tenure of the previous finance minister. The previous finance minister would not take any action against persons involved with various misdeeds, but at least he would not take personal benefits from them.
The banks do not run on the money of these so-called owners. They have less than 10 percent invested in the banks. The rest of the money belongs to the depositors. The government and Bangladesh Bank are supposed to be on the side of the depositors.
Now a certain clique has emerged centering the finance ministry, pitching the entire sector into risk. Even the funds of the depositors are at risk. No attention is being paid to the matter. The government remains silent and Bangladesh doesn’t dare to do anything about it.
The government banks were in a bad state from beforehand. Now the private banks are somewhat is the same condition as the government banks. This hasn’t happened overnight. It began when BNP was in government and now, during the term of the present government, things have deteriorated drastically. These persons, being in power for so long, are now looting indiscriminately. They are siphoning off money from the banks by various means. There have always been persons within the government pilfering money from the bank and this continues.
People near to the seat of power, involved in this pilferage, have weakened the banks. A mafia-like syndicate has emerged, aided and abetted by the government. And certain directors, ostensibly owners of the banks, are benefitting from these underhand manipulations. They are not even really the owners of the banks. The depositors are the actual owners of the banks.
There are four or five families who have thus grown close to the government. In the name of the bank owners’ association, they are running an extortion racket, taking money from the banks and giving it to the government. The government is using them too. In return, they are getting the government to relax various rules and regulations.
It is extraordinary how they have stepped up from just appeasing the government, to now actually getting the laws changed in their favour. It had become a sort of deal. The banks do not run on the money of these so-called owners. They have less than 10 percent invested in the banks. The rest of the money belongs to the depositors. The government and Bangladesh Bank are supposed to be on the side of the depositors.
These so-called owners, in order to keep the banks in their control, demanded that four members of a family be allowed to remain on the same bank board and for three years at a stretch. Bangladesh Bank initially objected to this demand, but the government went ahead and changed the laws.
Interestingly, there are even five members of the same family on the board of a first generation bank. Bangladesh Bank says nothing to them, and naturally the government says nothing. It seems as if the government is held hostage by them. The government has to do anything and everything they demand.
There was such a mafia in the banking sector even when I was the deputy governor of the central bank. They have grown multiple times more powerful and reckless. However, we (governor Mohammad Farashuddin and I) would always take action if anything went against the depositors. We would not say anything publicly, but try to bring the matter to the attention of the government, and the government would take decisions in the interest of the depositors.
Things have changed. The government has Bangladesh Bank fully in its control. Yet according to the Bangladesh Bank Order 1972, there is no legal scope for the government to have any meeting with Bangladesh Bank. Any interaction would be through a coordination committee. The finance minister cannot regularly communicate with the central bank governor. Therein lies the problem.
Unless the governor is independent-minded, it is difficult to carry out duties in a country like ours. In India, the governor even resigned. So the selection of a governor is very important. The bank owners summon the Bangladesh Bank governor to a hotel and extract their favours in no uncertain terms. This is not just an insult to the governor, but amounts to tearing down a regulatory body.
As the governor does not have a mind of his own, it is the government that has to decide not to intervene. There must be transparency in the appointment of the deputy governor too. The businessmen now decide on who will be appointed as deputy governor. The entire institution is in their hands. That is why a transparent process is required to appoint persons qualified for the posts.
The budget that has been declared this time is not based on facts, but on imagination. The finance minister must be a poet. Whatever has come to his mind, he has poured into the budget. The budget doesn’t even warrant discussion.
The prevailing situation indicates that the bank owners have the government in their control. That is why the bank owners can shoot at the directors of another bank, abduct them and subject them to torture. Not all bank owners are bad, but there are six or seven families that hold the government hostage.
There is a huge difference between the last Awami League government and the one at the helm now. They seem to be like enemies. After all, being elected by the people gives a different sort of strength. The present government does not have that strength. That is why they are held hostage by the bank owners. Awami League no longer looks to the people to come to power and so has no liability towards the people. And so the general depositors are at risk. This government is defaulter-friendly. The loan defaulters are favoured time and again.
The former finance minister had taken up initiative for reforms in the banking sector. The present finance minister had spoken on those lines in the last budget, but not this time. He has avoided mentioning the matter as it will just give rise to discussion. The government is unwilling to listen to such discussions. They will simply impose decisions and everyone will accept these.
We do not expect the present finance minister to take any initiative for bank reforms because he has taken certain measures that go completely contrary to reforms. He has fixed the interest rates, going against the market. The government represents those who have made money illegally. That is why the highest interest rate on loans is 9 percent, but the interest in deposits can be as low as the banks want. In other words, the depositors be damned, it is only the wealthy that matter.
If the government wants to reform the banking sector, then everyone presently involved in the finance sector will have to be removed. Professionals will have to be appointed. Professionals will have to be consulted, and they can be pro-Awami League. Surely pro-Awami League economists will not advise the government wrongly.
The budget that has been declared this time is not based on facts, but on imagination. The finance minister must be a poet. Whatever has come to his mind, he has poured into the budget. The budget doesn’t even warrant discussion. If things continue in this manner, the country will be bankrupt. And 160 million of the people will be submerged in this bankruptcy.
We are in very bad times. It is only the prime minister who can save us from this evil nexus. We wait for that.
* Khondokar Ibrahim Khaled is former deputy governor, Bangladesh Bank
*This analytical report, originally published in Prothom Alo print edition, has been rewritten in English by 'Ayesha Kabir.