Call for fewer nationalised banks

The Parliamentary Standing Committee on Finance has recommended a reduction in the number of nationalised banks that are in the grips of a capital crisis. – See more at: http://bdnews24.com/economy/2013/10/08/call-for-fewer-nationalised-banks#sthash.HW0zKnHj.dpuf

The committee, which met on Tuesday, suggested mergers and privatisation to overcome the problem.

The recommendations also include the closure of branches in the red, committee Chairman AHM Mustafa Kamal told the press on Tuesday.

The prescription has come at a time when the nationalised banks are struggling to cope with the aftershocks of the Hall-Mark Group scam and their own funds crunch.

There are nine nationalised banks — commercial and specialised banks together — in the country. The commercial ones are Sonali, Janata, Rupali and Agrani banks.

Kamal said the committee favoured the merger of the banks and their gradual privatisation.

“The banks seek infusion of funds from the government quite frequently. This means sums given earlier are lost for good. This bleeds the economy and has to stop,” he said.

Parliamentary committee documents show that, until June this year, Sonali, Janata, Agrani and Rupali banks together had a capital shortfall of Tk 90.63 billion.

Sonali Bank had run up a deficit of Tk 45.44 billion; Janata, Tk 10.62 billion; Agrani, Tk 20.48 billion and Rupali, Tk 4.15 billion.

Kamal said the committee had recommended the merger or privatisation of these banks, which are perennially in the red.

The committee suggested the closure of loss-making branches unless there are clear indications that they can be made profitable.

The Bangladesh Bank, the country’s central bank, had been advised to find ways to turn around the losing branches before steps were taken to shut them down, Kamal said.

“They will have to be shut down if they can’t be made profitable. Their employees would then have to be centrally absorbed,” he said.

The committee had argued against the opening of new branches of nationalised banks, Kamal said. The panel had also advised against the opening of a nationalised bank’s branch in places where the branch of another state-owned bank already existed.

Citing the Hall-Mark Group scam, the committee recommended the passing of a new law that would not only hold officers responsible but also make the board of directors liable to action for scams, to curb financial corruption.

The Anti-Corruption Commission has filed chargesheet against 25 people in the Hall-Mark Group scandal, but none of the board of directors of Sonali Bank, from which the group took nearly Tk 25 billion in loan against fake papers, have been hauled up.

The parliamentary committee has recommended ‘exemplary’ punishment for those guilty of financial misdemeanour. It has also suggested greater central bank oversight to combat corruption.

The committee also discouraged ‘single-point exposure’ of banks.

“When a bank loans big sums to one establishment, others don’t get the chance to borrow. To get over this problem, Bangladesh Bank has been advised to redraw the loan limit,” Kamal, a businessman, said.

The committee has also said measures must be taken to prevent an organisation from borrowing from various banks in different names.

Kamal said it had been found that several sister organisations of one establishment took loans from one bank or from several branches of the same bank.

The other members of the committee present at the meeting were Md Ali Ashraf, AKM Moidul Islam, Md Tajul Islam, Farida Rahman, and Simin Hossain Rimi. – See more at: http://bdnews24.com/economy/2013/10/08/call-for-fewer-nationalised-banks#sthash.HW0zKnHj.dpuf

The Parliamentary Standing Committee on Finance has recommended a reduction in the number of nationalised banks that are in the grips of a capital crisis.

The committee, which met on Tuesday, suggested mergers and privatisation to overcome the problem.

The recommendations also include the closure of branches in the red, committee Chairman AHM Mustafa Kamal told the press on Tuesday.

The prescription has come at a time when the nationalised banks are struggling to cope with the aftershocks of the Hall-Mark Group scam and their own funds crunch.

There are nine nationalised banks — commercial and specialised banks together — in the country. The commercial ones are Sonali, Janata, Rupali and Agrani banks.

Kamal said the committee favoured the merger of the banks and their gradual privatisation.

“The banks seek infusion of funds from the government quite frequently. This means sums given earlier are lost for good. This bleeds the economy and has to stop,” he said.

Parliamentary committee documents show that, until June this year, Sonali, Janata, Agrani and Rupali banks together had a capital shortfall of Tk 90.63 billion.

Sonali Bank had run up a deficit of Tk 45.44 billion; Janata, Tk 10.62 billion; Agrani, Tk 20.48 billion and Rupali, Tk 4.15 billion.

Kamal said the committee had recommended the merger or privatisation of these banks, which are perennially in the red.

The committee suggested the closure of loss-making branches unless there are clear indications that they can be made profitable.

The Bangladesh Bank, the country’s central bank, had been advised to find ways to turn around the losing branches before steps were taken to shut them down, Kamal said.

“They will have to be shut down if they can’t be made profitable. Their employees would then have to be centrally absorbed,” he said.

The committee had argued against the opening of new branches of nationalised banks, Kamal said. The panel had also advised against the opening of a nationalised bank’s branch in places where the branch of another state-owned bank already existed.

Citing the Hall-Mark Group scam, the committee recommended the passing of a new law that would not only hold officers responsible but also make the board of directors liable to action for scams, to curb financial corruption.

The Anti-Corruption Commission has filed chargesheet against 25 people in the Hall-Mark Group scandal, but none of the board of directors of Sonali Bank, from which the group took nearly Tk 25 billion in loan against fake papers, have been hauled up.

The parliamentary committee has recommended ‘exemplary’ punishment for those guilty of financial misdemeanour. It has also suggested greater central bank oversight to combat corruption.

The committee also discouraged ‘single-point exposure’ of banks.

“When a bank loans big sums to one establishment, others don’t get the chance to borrow. To get over this problem, Bangladesh Bank has been advised to redraw the loan limit,” Kamal, a businessman, said.

The committee has also said measures must be taken to prevent an organisation from borrowing from various banks in different names.

Kamal said it had been found that several sister organisations of one establishment took loans from one bank or from several branches of the same bank.

The other members of the committee present at the meeting were Md Ali Ashraf, AKM Moidul Islam, Md Tajul Islam, Farida Rahman, and Simin Hossain Rimi.

Source: Bd news24

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