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Economists call for purge in banking sector

  • Published at 01:25 am October 13th, 2019
Shujan
Sushasoner Jonno Nagorik holds a roundtable on the current state of the country’s banking sector in Dhaka on Saturday Courtesy

About Tk3 lakh crore actual default loan, Shujan claims

Former deputy governor of Bangladesh Bank (BB) Khondkar Ibrahim Khaled yesterday sought initiatives from Prime Minister Sheikh Hasina to conduct a purge also in the country's banking sector to net the willful defaulters of bank loans and their overlords.  

Expressing grave concern over the escalating default loans in banks, the former central banker also said that none of the regulatory steps taken to reduce default loan would work if the 'financial sector overlords' existed.

"Like illegal casinos in Dhaka, the banking sector has also got overlords who are politically well connected and influential. Initiate drive against them. Once they are dragnet, the banking sector will be back on its normal course of business," Khaled told a roundtable on current state of banking sector at National Press Club.

Sushasoner Jonno Nagorik (Sujon) organised the roundtable chaired by Sujon President M Hafiz Uddin Khan.

Ibrahim Khaled said: “They've established banks and looted public money. BNP, Awami League and Jatiya Party all dislike one another, but all of them have a huge contribution to creating loan defaulters.”

The noted banker, however, expressed his hope that Prime Minister Sheikh Hasina, who successfully exposed the casino overlords through a drive, would also be able to rein in the loan defaulters within a moment, if she so wished.

He said the the government's willingness was essential for the purification of the banking sector.

Former director general of Bangladesh Institute of Bank Management (BIBM) Professor Moinul Islam, presenting the keynote paper, said that a game was going on in banks in processing and approving loans in collusion with vested quarters.

“The government, bankers and loan defaulters all are aware of the real picture of the banking sector but the authorities appear to be reluctant to initiate right steps,” he said. 

Referring to bankers, he said majority of the banks were burdened with classified loan and passing through a hard time due to short of liquidity. 

He also recommended instituting a high-powered bank commission, which was the government committed to do in the current year's budget.

Eminent writer and columnist Syed Abul Maksud said people were keeping their deposits in banks and defaulters were stealing the money.

He said every bank branch should put up a list of loan defaulters' names on the notice board so that people could know about them.

Former managing director of Agrani Bank Abu Naser Bakhtiar said: "The main reason behind the rising classified loans was political people’s involvement in bank boards.”

While sharing his personal experiences of his long career, the retired banker said bank managing directors were often being accused of providing bad loans. "But the actual decision of approving and disbursing such loans comes from boards of directors, which is fully politically motivated," he said.

He also stated that uprooting classified loans would be impossible without ensuring good governance.

Sujon General Secretary Badiul Alam Majumdar also spoke, among others.   

"About Tk3 lakh core actual default loan"

Shujan says the actual amount of defaulted loan is now about Tk3 lakh crore while the government and other agencies concerned underestimate the figure.

According to Bangladesh Bank data, the amount of defaulted loan was Tk1,12,425 crore at the end of July, 2019.

“But, I can challenge that the real amount is far higher,” said Moinul Islam, in the article presentation.

He mentioned four reasons behind the underestimated figure of defaulted loan — hiding illegally rescheduled loans taken by bank owners, directors and big defaulters; not considering loans under trial in The Artha Rin Adalat; not counting interests of write-off loan and not considering loans under trial at the Supreme Court.

Citing International Monetary Fund's (IMF) recent data, he said the IMF counted Tk240,164 crore as being defaulted in the country. They included Tk79,242 crore under trial, Tk27,192 crore in special accounts and Tk21,308 crore with the government estimated amount, he added.

“If we include the amount of write-off loan, the defaulted loan will stand at about Tk3,00,000 crore,” he stressed.

“The situation of default loan has reached its climax,” Islam observed.

Earlier on June 22 this year, Finance Minister AHM Mustafa Kamal disclosed a list of top 300 loan defaulters, who defaulted loan of Tk50,942 crore at banks.

Recommendations

Shujan recommended a three-year special tribunal to settle defaulted loans rapidly as many lawsuits relating to defaulted loans were pending with courts.

It believes such initiative may bring a good change.

Besides, the organization put eight more suggestions for further development in the banking sector —appointing ombudsman, forming asset management company, abolition of the rules of filing lawsuits after final verdict from the Artha Rin Adalat in case of auctioning collateral or mortgage, arresting top ten loan defaulters of every bank, strengthening authority of Bangladesh Bank with abolition of Financial Institutions Division, merging week banks with strong ones, restricting long-term loan, protecting financial policy from any other interruptions.