9/6/2016

Thebankingsectorsuffersfromdisciplinedeficit

Thebankingsectorsuffersfromdisciplinedeficit
SyedJamaluddin
Disciplineinthebankingsectorisapparentlyunderstrain.Atthesametimecriminalactivitiesinbankshave
increased. In the absence of good governance, many banks have indulged in irregular activities and
corruption. Sensational stories are emerging from the banking sector. As a result, customers are losing
confidence.Asnofirmactionhasbeentakenagainstthoseresponsible,theseeventsaremultiplying.Apart
from Sonali Bank scandal, the central bank has found cases of cheque forgery, investment fraud and
irregularitiesinsomeotherbanks.
Bangladesh Bank, for example, has detected irregularities in disbursement of loan by BASIC Bank. This
bank has disbursed loans of Tk 60 billion (Tk 6,000 crores) in three years out of which Tk 30 billion (Tk
3,000crores)wasadvancedinirregularmanner.LoansofTk25billion(Tk2,500crores)weregivenfrom
threebranches.Theseloansweregivenwithoutanypropersystem.Namesoftheloanrecipientshavebeen
publishedinanewspaper.NamesofthebranchesareGulshan,SantinagarandDilkusha.Theseloanshave
becomeaburdenfortheBASICBank.Theofficialsresponsibleforsuchloanswerenottakentotaskrather
theywerepromoted.
Itisallegedthatloanshavebeengiventofakecompaniesbecauseofpoliticalpressureandconnivanceof
dishonest bank officials. Directors of stateowned commercial banks appointed on political considerations
haveallegedlyplayedanimportantroleinthisregard.MillionsofTakahasbeenwithdrawninthenameof
fake companies by opening local letter of credit. Although many irregularities have been detected by the
centralbank,nopunitiveactionhasbeentakenagainstbanksandbankofficials.Lettershavebeenissued
tothechiefexecutivesofthebanksseveraltimes.
HallMarkscandalofSonaliBankisunprecedentedanddidhaveanegativeimpactonthebankingsector.
HallMark Group and some other groups of businessmen have taken Tk 35 billion (Tk 3,500 crores) from
Ruposhi Bangla Hotel branch of Sonali Bank through local letters of credit. Depositors of this bank have
becomeworried.Thebankingsectormakesprogressonthestrengthofclientconfidence.Thecentralbank
will have to be more careful so that confidence on baking is not shaken. Political influence is making the
banking sector risky. Government's management is also responsible for indiscipline in the banking sector.
Rulesofgrantingloanshavebeenneglected.
Plunderingofresourcesistakingplaceinstateownedcommercialbanks.Loansarebeingadvancedinthe
name of fake companies. There is little prospect of recovering such loans. Bangladesh Bank is busy with
stateowned commercial banks and is hardly able to inspect the private commercial banks for shortage of
manpoweralthoughirregularitieshavealsobeennoticedinprivatecommercialbanks.
Thebanksaresigningloanagreementswithoutlookingintomanagementofliquidityproblems.Grantingof
riskyloansduetopoliticalconsiderationsiscreatingpressureonliquidity.Thecentralbankhasproduceda
detailedguidelineforthemanagementofbanks.Butthisisnotbeingfollowed.Itisallegedthatchairmenof
thebanksinterfereintheworkofthebanksgoingbeyondtheirauthority.Thisisaviolationofcentralbank
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9/6/2016

Thebankingsectorsuffersfromdisciplinedeficit

rules. The tenure of chairmen of stateowned commercial banks has been extended despite allegations
againstthem.
Becauseofanontransparentandweakfinancialsystem,wearenotonlylosingforeigninvestmentbutwe
cannotinvestourownresourcesinourdevelopmentprojects.Oursurplusresourcesarebeingtransferred
abroad.SwissbankmoneyismostlyownedbytherichmerchantsofAfricaandAsia.Thefoundationofour
economy is eroded for lack of transparency, accountability and absence of monitoring in our banking
system. The comments of the finance minister is encouraging the corrupt officials. The health adviser has
allegedlytriedtoinfluencetheanticorruptioncommission.BangladeshBankrequestedthegovernmentto
breakuptheboardofdirectorsofSonaliBankbutthefinanceministerdidnotagreetodothis.
ItissuggestedthatajudicialenquirymaybeheldtolookintotheHallMarkaffairandpunish those found
responsible. Political connections must not block justice. The government will be held responsible for any
failure in punishing the culprits. The National Board of Revenue (NBR) has found that none of the
companiesoftheHallMarkGrouppaidcorporatetaxsofar.
It is reported that during the last three and half years, about Tk 100 billion (Tk 10,000 crores) has been
plunderedfromthefourstateownedcommercialbanks.Abigchunkofthismoneyhasallegedlygoneinto
the pockets of politically influential people and much has possibly been transferred abroad. There is clear
evidenceoflackoftransparencyinappointingtheboardmembersofthebanks.
BangladeshBankhastobringbackdisciplineinthebankingsystem.Thegovernmentwillhavetocooperate
in the process otherwise nothing will happen. Only professional people may be inducted in the boards of
directors. Sincerity of the government is crucially important. Good governance in the commercial banks is
theneedofthehour.Itisallegedthatloandefaultisnotbeingproperlyreflectedinbankaccounts.Thisisa
seriouslapseandanexampleofcorruptpractice.Havewegonedownsolow?
Thewriterisaneconomistandcolumnist.
syedjamaluddin22@yahoo.com

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