Syed Jamaluddin
Discipline in the banking sector is apparently under strain. At the same time criminal activities in banks have 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. As no firm action has been taken against those responsible, these events are multiplying. Apart from Sonali Bank scandal, the central bank has found cases of cheque forgery, investment fraud and irregularities in some other banks.
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 3,000 crores) was advanced in irregular manner. Loans of Tk 25 billion (Tk 2,500 crores) were given from three branches. These loans were given without any proper system. Names of the loan recipients have been published in a newspaper. Names of the branches are Gulshan, Santinagar and Dilkusha. These loans have become a burden for the BASIC Bank. The officials responsible for such loans were not taken to task rather they were promoted.
It is alleged that loans have been given to fake companies because of political pressure and connivance of dishonest bank officials. Directors of state-owned commercial banks appointed on political considerations have allegedly played an important role in this regard. Millions of Taka has been withdrawn in the name of fake companies by opening local letter of credit. Although many irregularities have been detected by the central bank, no punitive action has been taken against banks and bank officials. Letters have been issued to the chief executives of the banks several times.
Hall-Mark scandal of Sonali Bank is unprecedented and did have a negative impact on the banking sector. Hall-Mark 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 become worried. The banking sector makes progress on the strength of client confidence. The central bank 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. Rules of granting loans have been neglected.
Plundering of resources is taking place in state-owned commercial banks. Loans are being advanced in the name of fake companies. There is little prospect of recovering such loans. Bangladesh Bank is busy with state-owned commercial banks and is hardly able to inspect the private commercial banks for shortage of manpower although irregularities have also been noticed in private commercial banks.
The banks are signing loan agreements without looking into management of liquidity problems. Granting of risky loans due to political considerations is creating pressure on liquidity. The central bank has produced a detailed guideline for the management of banks. But this is not being followed. It is alleged that chairmen of the banks interfere in the work of the banks going beyond their authority. This is a violation of central bank rules. The tenure of chairmen of state-owned commercial banks has been extended despite allegations against them.
Because of a non-transparent and weak financial system, we are not only losing foreign investment but we can not invest our own resources in our development projects. Our surplus resources are being transferred abroad. Swiss bank money is mostly owned by the rich merchants of Africa and Asia. The foundation of our 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 allegedly tried to influence the anti-corruption commission. Bangladesh Bank requested the government to break up the board of directors of Sonali Bank but the finance minister did not agree to do this.
It is suggested that a judicial enquiry may be held to look into the Hall-Mark affair and punish 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 companies of the Hall-Mark Group paid corporate tax so far.
It is reported that during the last three and half years, about Tk 100 billion (Tk 10,000 crores) has been plundered from the four state-owned commercial banks. A big chunk of this money has allegedly gone into the pockets of politically influential people and much has possibly been transferred abroad. There is clear evidence of lack of transparency in appointing the board members of the banks.
Bangladesh Bank has to bring back discipline in the banking system. The government will have to cooperate 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 the need of the hour. It is alleged that loan default is not being properly reflected in bank accounts. This is a serious lapse and an example of corrupt practice. Have we gone down so low?
The writer is an economist and columnist.
Source: Financial Express
