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Dhaka Tribune

Economists: Analyze past measures before establishing roadmap to curb NPLs

'Why do we have to talk about a tougher definition of defaulter or classified loans or number of tenure of directors on the board?'

Update : 11 Feb 2024, 07:12 PM

Economist Dr Wahiduddin Mahmud on Saturday questioned rules including using  international standards to declare someone as defaulter, introducing globally recognised definitions of classified loans.

"All the rules and regulations were effective once, but were not included in the Bank Company (Amendment) Act later," the economist said during the launch of the fifth edition of Bank Almanac at the National Press Club in the capital.

"These rules and regulations have not just gone, influential people and vested quarters helped in removing them entirely."

"Now, why do we have to talk about a tougher definition of defaulter or classified loans or number of tenure of directors on the board?" he questioned. "We should review and analyze previous rules and regulations before setting a fresh roadmap to mitigate defaulted loans."

Bank Almanac can work in preserving institutional memories as Bangladesh Bank itself is reluctant to preserve them, according to Dr Mahmud.

He also said the amount of loans written off was more important to mention than the amount of classified loans to understand the health of the banking sector.

He said Bank Almanac should mention loan written-off information, especially individual and cumulative amounts of written-off loans.

Banks should have more detailed and audited disclosures stating particulars of sponsor directors, their total amount of loans against share and publish them in newspapers.

Dr Mahmud said interest rates should have an upper limit to protect smaller banks.

"The IMF and the World Bank don't understand the local reality of Bangladesh."

Dr Mahmud said new banks permitted under political consideration could not collect enough deposits to survive.

"Now, the government wants to merge them with large banks. If it listened to what we had said there was no room for new banks and the present situation would not have arisen."

Referring to recent talks on merging weaker banks with stronger banks, the economist said good private banks would not take burden of weak banks.

"If the government wants to do it forcibly, they can merge with state-owned banks."

Dr Mahmud said the country did not make anti-monopoly policy in the law when formulating rules and regulations, which was a grave mistake.

"A particular family couldn't have taken the control of so many banks by just purchasing shares of banks if such anti-monopoly were in place."

"The same mistake was repeated and we don't know when we would learn and from how many mistakes," he said.

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