Finance Minister AMA Muhith yesterday admitted that political appointments in the boards was one of the reasons behind the poor performance of the state-owned banks.
Emerging from meetings of the cabinet committees on economic affairs and public purchase, he told reporters: “When we came to power last time [in 2009], we made some political appointments in the state-owned banks. We thought they would consider the banks as their own institutions. But that decision has backfired.”
He also said: “We have already appointed experienced banking professionals in the boards of the state-owned banks instead of appointing people on political considerations.”
On Wednesday, the government appointed former Krishi Bank chairman Sirajuddin Ahmed Chowdhury as the chairman of state-owned Janata Bank.
There is an allegation that when he was the CEO of state-owned Sonali Bank, Sirajuddin went to visit a Sonali Bank-financed project by the entrepreneur’s helicopter.
Yesterday, when a reporter reminded the finance minister of that, he said he knew about the matter and it was a “misconduct.”
Muhith’s remark comes on the back of a heated exchange of words between him and Professor Abul Barkat, the immediate past chairman of Janata Bank. The standoff was ignited after the government had suspended the bank’s CSR activities, saying some of its funds were in question.
Barkat, who was at the helm of the bank for two consecutive terms, alleged that Muhith had sought money from the bank’s CSR fund for a boat race in his home constituency. As his demand was not entertained, he stopped the bank’s CSR activities, Barkat alleged.
But Muhith said the funds should be put into “better” use and Barkat could not stay the bank’s chairman forever.
During its 2009-2014 tenure, the Awami League government appointed 25 chairmen and directors in the four state-owned banks namely Sonali, Janata, Agrani and BASIC banks. All those appointments were said to be made under political considerations. Barkat, a teacher of economics at Dhaka University, was one of them.
Earlier this year, Jatiya Party lawmaker Sheikh Abdul Hye Bachchu, who was the board chairman of BASIC Bank, stepped down following allegations of financial irregularities involving Tk4,500 crore.
After that, the BASIC Bank board was dissolved – the second instance in less than two years of firing the board of a state-owned bank for financial anomalies. In December 2012, the board of Sonali Bank was reconstituted following the Hall-Mark scam.
Investigators have found that the directors were largely responsible for the loan scam. Former Sonali Bank directors and Awami League leaders Jannat Ara Henry and Saimum Sarwar Kamol pulled the strings when the Hall-Mark group took Tk2,686 crore as loan from the bank on the basis of forged documents.
Mamun Rashid, former country head of Citibank NA, told the Dhaka Tribune: “While serving as chairmen, university professors have badly damaged the financial condition of the state-owned banks over the past six years. They were all politically appointed directors.
“The big scams such as the ones staged by Hall-Mark and Bismillah groups and the loan fraud in BASIC Bank are all results of that,” he said.
In its recently published Financial Stability Report 2013, the Bangladesh Bank asked the banks to reduce bad loans by writing them off saying the major financial scams had had their toll on the country’s banking sector because there was a lack of corporate governance.
This, it said, was reflected in the increasing classified loans, the large amount of existing bad loans and the declining quality of assets owned by the commercial banks, which turned out to be a major concern for the banking sector.
