Loss-making state-owned banks should be privatised

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It is high time that alternatives were considered in order to stop propping up these highly inefficient institutions while wasting money from the public coffers

The latest Bangladesh Bank data reveals an alarming trend: The number of loss-making branches of six state-owned banks has doubled at the end of the 2015-2016 fiscal year from the same time in the previous year.

The loss-makers — Sonali Bank, Rupali Bank, Agrani Bank, Janata Bank, BASIC Bank, and Bangladesh Development Bank — increased their expenditure but earned less in the past year. Four of them opened up many new branches while making massive losses.

This is unacceptable: The coddling of state-owned banks needs to stop.

It has been seen repeatedly that the central bank has been unable to properly manage the state-owned banks and rein in their losses.

SOBs have inadequate capital to manage their losses on bad loads, but continue to flout rules that guard against undue risks. Their loan approval processes are often fraught with major irregularities. There are records of a particular SOB breaching the law restricting the loaning of more than 25% of the bank’s capital to a single group or individual.

It is high time that alternatives were considered in order to stop propping up these highly inefficient institutions while wasting money from the public coffers. There are many better ways to spend tax-payer money, like education and health, rather than help banks with proven track records of failure.

Private banks have demonstrated greater efficiency, and are also free from the political influence and corruption that plague state banks.

State banks, on the other hand, have not shown the ability or the willingness to reform.

It is time to cut the cord and privatise these state-owned banks.

Source: Dhaka Tribune

1 COMMENT

  1. Yes, this is not acceptable. But privatization is not the solution. We have seen irregularies and fraudlent loan approval processes in the private banks as well. Millions of taka have been siphoned off by the directors/owners of the private banks and by people connected with them. The Basic Bank scam of BDT 4,500 crore involved loan approval without proper documentation and scrutiny. Premier Bank,
    Shajalal Islami Bank, Jamuna Bank, Premier Bank and South-East Bank were involved with BDT 200 crore loan scam of Bismillah Group. A credit card scam involving over BDT 10 crore detected at United Commercial Bank (UCB). The Hallmark group swindled about BDT 3.06 billion from Prime Bank, BDT 1.64 billion from Jamuna Bank, BDT 1.469 billion from Shahjalal Islami Bank and BDT 0.63 billion from Premier Bank.
    Everyone knows, the 2008-2009 global financial crisis was brought about by fraudent transactions and risky behaviour of the private sector dominated financial institutions in the US.
    On the other hand, Singapore and many other countries have highly efficient and profitable state owned banks.
    Thus, ownership is not the root cause of failure or inefficiency and privatisation of state owned enterprises are not the solution to the problem.

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