There are mainly seven reasons behind loan scams in the state-owned banks.
These are – political appointment on bank boards, activities of government-supported CBA leaders, interference of officials with political affiliations, inability to face political pressure, lack of supervision, lack of competence in understanding land-related documents and faulty field survey.
Policymakers are aware of these things but the issues remain unaddressed. This is creating instability in the state-run banks. The banking system is collapsing and people’s money is being looted.
But leaders of the banks’ boards go scot-free.
Finance Ministry sources said the government was paying the price for the state-owned bank boards’ corruption. The face shortage of capital at year end and the government has to make up the deficit.
In December 2013, the government gave Tk4,100 crores to meet capital shortfall of four banks. A year later, the state-owned banks received Tk6,000 crores from the government.
Civil society think-tank Centre for Policy Dialogue’s study shows that the state-owned banks received Tk11,705 crores between 2009-9 and 2015-16 fiscal years for recapitalization. The government gave another Tk2,000 crores for recapitalization in the 2016-17 fiscal.
In the last nine fiscal years, the government provided the state-owned banks nearly Tk14,000 crores.
It has been learnt that many of those appointed to the banks’ boards by the government present only those matters in the board meeting that they are interested in. Many even create pressure on the board for getting them approved.
The banks’ managing directors or executives, on the other hand, do not want to violate the law. This, at times, leads to heated arguments between bank executives and board members. Insiders say there are instances of public harassment over such issues.
An investigation revealed that board directors, who are affiliated with the government, and partisan CBA leaders, try to influence the daily activities of the bank. These leaders spend most of their time lobbying with the banks’ managing directors and general managers.
The subject of their lobbying varies from approving big loans to the transfer of other bank officials. They also interfere in the banks’ daily activities and even use the banks’ vehicles, drivers, telephones, faxes and even e-mails.
There are allegations that in many cases members of the banks’ boards were involved in looting state-owned banks such as Sonali Bank, Rupali Bank, Janata Bank, Agrani Bank, Basic Bank, Krishi Bank, Rajshahi Unnayan Bank and Bangladesh Development Bank.
Many of these banks’ boards of directors were formed mainly on political consideration. Being involved with the ruling party, the board members earned huge sums of money by approving and disbursing loans, influencing appointments to banks, promotions and transfer.
Many of them are also taking big loans, sometimes against their names and sometimes using the names of the relatives or family members.
They also get to interfere in approving big sums of loans. These directors are embezzling billions of taka by approving loans against fake, non-existent organizations and defaulters.
Insiders said the bank officials were, to some extent, forced to follow the unethical orders of influential board members.
Finance Minister AMA Muhith has blamed the banks’ boards for corruption and irregularities in the sector. He has admitted that capabilities and standards are not taken into consideration when forming bank boards.
State-owned Sonali and Basic banks have been severely criticized over incidents of embezzlement and looting.
Hallmark and another group have taken Tk3,500 crores from Sonali Bank by pleasing the bank’s board. Hackers hacked the bank’s server and got away with about $250,000. Moreover, there are doubts whether the bank will be able to recover big defaulted loans.
Former Bangladesh Bank deputy governor Khondkar Ibrahim Khaled has dubbed the irregularities at Basic Bank as “plain robbery.”
Finance Minister Muhith has admitted that people are appointed on political considerations at bank boards. “There will always be some politicians on the bank’s boards. At times, the choices are not correct and that causes problems,” he said.
He blamed the banks’ boards and lack of government supervision for scams in the state-owned banks. “The board of directors are responsible for the irregularities. Everyone has to admit that fact,” he added.
“The government is discouraging political appointments to banks. Experienced and people with expertise are being appointed to bank boards,” he added.
This article was first published on Bangla Tribune