The government has asked the Bangladesh Bank (BB) to undertake banking sector reform to implement election pledges of the Awami League government-elect, which includes tackling capital flight and money laundering.
The Financial Institution Division under the Ministry of Finance (MoF) on Thursday directed the BB in this regard, to restore financial discipline in the economy, and to strengthen the ailing banking sector.
Quoting the reform pledges with regard to banks, included in the 13-point AL manifesto, the Division in its instruction asked the BB for immediate effective measures.
Quoting the AL manifesto, the finance ministry asked the BB to undertake initiatives to tackle illegal capital flight to foreign countries, and to combat money laundering effectively.
It is largely believed that a huge amount of tainted money is laundered abroad from Bangladesh through different illegal means.
In 2017, a report of Global Financial Integrity said unrecorded capital flow from Bangladesh stood at $61.63 billion between 2005 and 2014, riding mostly on false invoicing.
The GFI report also revealed that illicit capital flight from Bangladesh was on a higher trend from 2007 following the political turmoil of the time, and it continued until 2013 when a record $9.66 billion was siphoned off.
Of the total $61.63 billion in illicit capital flow, $56.83 billion was through falsified trade invoicing, while the remaining $4.8 billion could not be traced in the balance of payments data, the report added.
The GFI, a Washington-based research and advisory organisation unveiled the report titled “Illicit Financial Flows (IFFs) to and from Developing Countries: 2005-2014”.
AL pledged to undertake an effective and sustainable strategy to lower the ratio of nonperforming loans and implement the Bankruptcy Act. Without hampering the market system, the central bank would keep interest rates under control skillfully by adopting specific strategies, and the BB would take initiatives to inspect the expertise and skill of banks in loan approval,, and disbursement and liabilities to clients, said its manifesto.
The manifesto pledged to make the ongoing supervision and regulation of commercial banks and financial institutions more effective and powerful, effectively addressing banking fraud, including loan defaulters.
Implementing the National Strategy 2015-2017 on combating money laundering and terror financing will get priority, vows the election manifesto.
It vowed to downsize soaring NPLs, broaden the Credit Information Bureau (CIB) of BB, expand mobile financial services across the country, digitalize financial transactions, and contain bank interest rates.
The pledge also spoke of bringing culprits in the banking sector to book.
As of September, 2018, NPLs in the banking sector stood at nearly Tk 1,00,000, crore or 11.45% of total disbursed loans. “NPLs are at their highest in the country,”
Said Zaid Bakht, Research Director, Bangladesh Institute of Development Studies, while the Chairman of Agrani Bank Ltd said the new government would be successful in addressing problems crippling the banking sector.
Stressing on establishing a separate bench in the High Court, he said: “A separate Bench in the High Court for dealing with cases concerning default loans is of paramount importance to reduce NPLs.”
“The initiative of the government to implement its pledges concerning the banking sector and involving the BB in this regard is a good step forward,” he added.
