Fund without action against Farmers Bank concerning

THE government’s final decision to shelve out Tk 7.15 billion for Farmers Bank, which has run into loan scams so much so that it now finds hard to return money to the depositors, comes with a grave concern. The bailout initiative, which has been widely criticised by economics and experts in the banking sector, proposes to inject Tk 1.6 billion by way of four state-owned commercial banks — Sonali, Agrani, Janata and Rupali — and Tk 450 million by way of the state-owned Investment Corporation of Bangladesh. The finance minister has already had the consent of the prime minister and some details are left be worked out with the four-state owned banks that would shelve out the money in the first instance of state-owned banks coming to the aid of a private bank that is seriously ailing. Farmers Bank was given the licence of operation in 2013 said to be on political considerations and it primarily sought Tk 11 billion in bailout funds to overcome the problems of its liquidity crisis caused by aggressive banking, irregularities in loan disbursement, gross mismanagement and undue interference by the bank’s previous board. The Bangladesh Bank in a report in October 2017 also termed the bank risky.

Yet, the bank ran into problems, with the government finally coming to decide to bail out the bank. As the case concerns money of the depositors, the government may need to inject money so that the bank does not die. But the problem that the government has so far left unattended and does not seem to be willing to attend to any time later is that the government is injecting such a high amount of money into the ailing bank without holding to account the people who have brought the bank down. While economists and bankers are sceptical whether the bailout fund could address the irregularities, gross mismanagement and undue interference by the bank’s board, almost all are of the opinion that this would set a bad example, put the government into disrepute and put the banking sector as a whole in jeopardy. Some say, as New Age reported on Friday, that the government has the duty to ensure the survival of a licensed bank yet Farmers Bank does not deserve any government assistance. The Transparency International, Bangladesh, opposing the government move, demanded punishment of the directors and officials in the bank who have been responsible for the bank’s plight.

The government, under the circumstances, must rethink its decision to extend the bailout package to the bank before it deterrently punishes the directors and officials responsible for the situation. By not doing so, the government is highly likely to encourage corruption and mismanagement not just in Farmers Bank but in the whole of the banking sector. The government must first put a check on the aggressive banking attitude, stop the scope for irregularities in loan disbursement, improve the bank management, and stop undue board interference in banking matters before it shelves out the fund.