The banking sector is seen as the engine of the economy. One of the tasks of the bank is to provide loans to keep the economy and business of the country going and to collect these loans on time. This loan is the bank’s most important asset. A strong banking system with investments in safe and welfare-oriented sectors is essential for the economic development of any country. Those dealing with the bank are usually educated, and aware; Everyone’s eyes and ears are open.
Everyone knows and understands that no bank can achieve success without protecting the public interest and the interests of depositors with the coordination of trained and honest officials. The political implications were evident in every incident of bank robbery, past, and present. There is no end to the problems in the country’s banking sector. Due to rampant corruption and irregularities, political clout in loan disbursement, and the central bank’s lack of control over public sector banks, defaulted loans have largely spiraled out of control.
Apart from that, the number of private bank defaults is also alarming as the managers ‘eat up’ the deposits by sharing loans among themselves. In short, the banking sector has become a hostage for defaulters. Banks are more than money in Bangladesh. Many major world economies do not have as many banks as Bangladesh. Currently, there are 61 member banks in Bangladesh. But looking at the size of the country’s GDP, no correlation is found between the economy and the number of banks.
The current GDP of the Southeast Asian country of Thailand is more than $500 billion. But the number of banks in the country is only 18. Of these, six government and 12 private banks. On the other hand, Singapore is another developed country economically. The country has only five banks against a GDP of 340 billion. Meanwhile, Malaysia has only eight banks with a GDP of 337 billion. Although the number of domestic banks in the countries is smaller, many foreign banks invest in the countries because of the prosperity of the economy. The number of banks in India, a country of about 1.3 billion inhabitants, is much less than that of Bangladesh.
In addition to 12 state-owned banks, 22 private banks are operating in the country. These banks provide banking services all over India. However, in addition to 43 regional banks in India, 46 foreign banks are also active. Many regional banks in India have a stronger position than nationally operating banks. On the other hand, Pakistan has 22 banks at 262 billion in GDP, 17 banks at 361 billion in the Philippines, 20 banks at 432 billion in Nigeria, and 39 banks at 365 billion in Egypt. In short, when a country is economically prosperous, there is an increase in the activities of foreign banks. But in the case of Bangladesh, that has not happened in recent decades. The number of private banks in Bangladesh is increasing day by day, but the number of foreign banks is decreasing.
Why are the rich so interested in banking in Bangladesh? What is their purpose? Ordinary people asked many questions about this, but no government thought of caring about them. A few days ago, the Attorney General said that many people use banks to loot people’s money. Not even in metho speech. He said this during a hearing in the Supreme Court, where the then chief justice himself was present. The state’s chief prosecutor has no chance of dismissing this statement as mere words. Not only the Attorney General but also a bank of the Supreme Court had a harsh remark about the banking sector.
On hearing a subpoena, a jury said the country’s banks were empty and thousands of rupees had left the country. If the money now moves away from government banks such as private banks, this sector will collapse. The court’s focus on looting and money laundering in the banking sector gave the community hope at the time but now faces a stumbling block. From the court itself it is said, how is such a bank established? Who gets approval from the bank? Who gives permission? Again, after stealing or looting, without taking action against those involved, why incentives?
Questions of law have been on the lips of ordinary people for some time, but are now almost unknown. In the current context, it is not possible to achieve balanced development and high growth by maintaining irregularities in the banking and financial sector. Lack of good governance, high tax rates, financial crime and theft, and a lack of policy consistency affect the business environment from day to day. For the sustainable economic development of the country, political stability, keeping the banking sector on a positive trend and a fair and simple understanding of the ruling party with all financial institutions, including corporations, and insurance, no one seems to think so.
Such a safe and illegal way to loot the country’s banking sector has not happened in a day. It is necessary to turn around from there even if there is no sound or if it is unclear. Clearing out for looters and trying to rescue them is obvious at all times. The debt scandal of the country’s bank managers is not such a crime now. They have put it in some sort of law because no strong action has been taken by the government or the central bank. However, the mutual understanding of the directors on this point is excellent. ‘Bhaga-yoga’ is quite a match between them. They take loans from each other’s banks in collusion with each other like some kind of uncle. Research by the Bangladesh Institute of Bank Management (BIBM) shows that 90 percent of irregularities in the banking sector are committed by the bank’s people. Because the directors have the most power in the bank.
As a result, defaulters are given perverse incentives rather than regulation or deterrence. Although many harsh words were spoken during the meetings and seminars, the signs of the government’s resolute decision to make concessions to the debtors are unclear. It has plunged the banking sector into a pit of inequality. Defaulters are encouraged. More reckless. On the contrary, real or good customers are discouraged and frustrated. Bank managers borrow huge amounts from other banks. Of course, other borrowers are deprived of this. Most of the private bank directors are influential businessmen in the country. In addition to the banking business, there are also other businesses in their hands. In the past, the directors borrowed heavily from their banks and did not pay them back. When he defaulted, Benami created a loan to prove the repayment of the loan. Again, they waived interest on their loans unethically. To prevent this unethical activity by the directors, Bangladesh Bank sets a limit on the number of loans that can be withdrawn from its bank. Currently, there is a provision for a director to borrow 50 percent of the paid-up capital from his bank.
However, such a limit is not drawn if a bank manager takes out a loan with another bank. The directors have therefore made use of this option. They freely take loans from other banks to show their business needs. To reduce defaults, these defaulters have been given various benefits, including the regularization of loans with a down payment facility. It decreased non-defaulted loans, it increased. There is no verification at the time of their loan. Borrowers with political connections are already influential. Bank directors or senior officials not only arrange loans for them but also take care of them in certain cases. There is no sign of breaking this cruel and farcical pattern. Recently, the governor of Bangladesh Bank advised the bank managers not to interfere in the bank management activities. This is very current advice. The bank has been in danger in recent years by making huge loans at the advice of board members. Once again, a divided opinion of the board of directors was observed on lending to a customer. News of the split in boards of several banks based on bad loans has also hit the media at various times.
Therefore, the board of directors must properly discharge its responsibilities in these matters. And when granting the license to open the bank, the least qualified people should be selected, because in most cases, the members of the board of directors consider themselves the owners of the bank and try to use the money of the depositors as their own. to use your own money, which is not desirable. The central bank must ensure that the board members and enterprising shareholders do not give improper instructions to the bank’s governing authorities, thinking that they are the owners of the bank. Banks tend to hunt for large customers. However, if we look at the loan collection data from the bank, we see that the loan repayment rate of small and medium-sized entrepreneurs is good. However, entrepreneurs of this class have to undergo various kinds of ironies in obtaining loans.
Measures must be taken to ensure that a bank maintains a balance in the distribution of loans to different business sectors. The central bank is doing special supervision to make 10 banks weak in financial indicators ‘strong’. The roadmap is taken from them to solve the problem by talking to the banks. The central bank sets the time for the execution of various steps; Agreements are even made with banks. Consultations with the banks will take place every three months on the implementation and progress of the agreement. Meanwhile, Bangladesh Bank has met with the bank’s senior officials. The central bank identified these banks as weak based on insufficient collateral, increase in non-performing loans, capital adequacy, loan-to-deposit ratio, and amount of provisions.
Bangladesh Bank has classified them as weak. Banks that do not have good governance and accountability, have influential executives, are dominated by management, have insufficient capital, and do not rearrange loans properly, are generally considered bad banks. Observers have been deployed at many banks before but to no avail. They were Saxon Poles. But if the crime is not dealt with, there will be no results from these discussions or meetings. Before that, the Memorandum of Understanding (MOU) of state-owned banks was signed with Bangladesh Bank and Bangladesh Bank will regularly consult with them. But the banks don’t seem to have improved. But it is a positive aspect that Bangladesh Bank has taken the matter seriously. Not only the weak 10 banks, but Bangladesh Bank must also be strict with other banks. All banks must be supervised by Bangladesh Bank. This consequence of the banking sector is the failure to take measures against irregularities. Most irregularities are hidden. Bangladesh has started meeting with the boards of directors, directors, and chief financial officers of the respective banks to get the banks in good shape. After the meeting, MoUs will be signed with these banks. The central bank concludes three-year MoUs with several banks. A mountain of irregularities has accumulated at some banks. Loans are mutually provided anonymously. Again, the amount of collateral to be taken against these loans was not taken. The quality of the collateral taken is very poor. Fake debt is created and the debt service is shown. In this way, delinquent loans are hidden.