The formation of a banking commission to reform the country’s banking sector, a much talked-about issue even a year ago, has lost momentum.
Finance Minister AHM Mustafa Kamal also talked about reforming the sector, and the need for a banking commission.
In his budget speech for fiscal year (FY) 2019-20, he had said that he would examine the possibility of forming an independent banking commission.
But fast forward to the national budget for FY 2021-22 presented last week, there was no mention of it.
However, the finance minister mentioned in his budget speech that the government is implementing various activities to reform and develop the financial sector.
To this end, steps have been taken to update and reform the following laws, which are now in the final stage: Bank Company (Amendment) Act; Payment Systems Act; Secured Transaction Act; Bankruptcy (Amendment) Act and Asset Management Company Act, as per the finance minister's budget speech.
But there was no mention of forming a banking commission.
“The country’s banking sector is facing various problems, but there was no specific indication of any banking reforms in the finance minister's budget speech for the next fiscal,” said Zahid Hussain, former lead economist of the World Bank, Dhaka office. “Firstly, you have to recognize the problem and then solve it.”
The economist further said that the policymakers think that all the problems of the country’s banking sector have been solved so there is no need to form a bank commission.
“The finance minister mentioned in his speech that the non-performing loans reduced last year, but everyone knows the reason for it,” said Zahid Hussain, adding that the bad loans reduced last year as the central bank offered loans moratorium facility to the borrowers owing to the Covid-19 pandemic.
“This is not a solution for the long run.’’
“A strong banking commission is very needed to address the current problems in the banking sector,” Hussain added.
However, former adviser of the caretaker government AB Mirza Azizul Islam said the banking commission in not enough to reform the banking sector, as political interference must be removed from the sector.
He also said that everyone knows the problems of the banking sector and it is clear what needs to be done.
“It is now possible to make the banking sector better only if there is intent.”
Centre for Policy Dialogue executive director Fahmida Khatun said that the current ruling party made commitments in their election manifesto that they would develop the troubled banking sector, but the sector now is facing several problems instead of development.
The economist said that the government should take immediate initiative to form a strong banking commission to reform it.
Before the national elections in December 2018, the present political party in power made a number of commitments regarding the banking sector in its election manifesto.
Reducing the non-performing loans (NPLs) and improving the efficiency of the banking sector was one of them.
But, in reality, the health of the country’s number of banks and NBFIs has become worse. At the end of December last year, total defaulted loans in the sector stood at Tk88,734.1 crore.
Former Finance Minister Abul Maal Abdul Muhith announced the formation of the banking commission for the first time in his budget speech for the 2015-16 fiscal year.
