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Dhaka Tribune

Revive bank modernisation scheme: WB

Update : 06 Aug 2013, 03:30 AM

The World Bank wants to launch a project to upgrade the governance of Bangladesh's state-owned commercial banks (SOCBs) which have recently been hit by large loan forgeries.

A similar project was conducted by the global lender earlier to modernise the state-owned commercial banks. The project was titled "Enterprise Growth and Bank Modernisation" starting from July 2004 to December 2010.

Under the $500m project, there was a plan of divestment of Rupali Bank and corporatising three state-owned banks - Sonali, Janata and Agrani.

A World Bank evaluation report said three state-controlled banks (SCBs) - Sonali, Janata and Agrani - have made noticeable progress in their operational and financial performance after execution of EGBM project.

Actual non-performing loans have dropped by 21.5% in Sonali Bank, 23.9% in Janata Bank and 19.8% in Agrani Bank in 2008, according to the Information Note in 2008.

"If the World Bank's modernisation project had continued, the country's banking sector performance would have been improved and we could have avoided those big forgeries," said Former Bangladesh Bank Governor Dr Salehuddin Ahmed.

Now the World Bank wish to introduce a project like EGBM from this year to help the banks overcome capital shortfall faced after the big loan scams, said a senior government official at the Bank and Financial Institution Division.

He attended a meeting of the Division on Sunday which discussed about the project of the World Bank.

World Bank's Vice President for South Asia region Phillip Horrare will visit Bangladesh at the end of September or early November to sign agreements on financing of the project, the official said.

With the Bank Division Secretary Dr Aslam Alam in the chair, the meeting was attended by the World Bank's country director and the members of the lender's Bangladesh Financial Sector Monitoring Mission.

The Mission is led by financial sector specialist Shamsuddin Ahmed while other members include financial specialists Niraj Verma, Shah Nur Quayum, Damodaran Krishnamurti and programme assistant Bridget Rosario. They will stay in Dhaka until August 8.

Statistics shows that the Sonali Bank and Janata Bank incurred losses Tk12,77bn and Tk5.42bn respectively in 2012. Although Agrani bank and Rupali Bank made profits Tk6.77bn and Tk1.31bn respectively in the same year.

Banking Division officials said the state-owned commercial banks have been incurring losses for a long time. Mismanagement is a major reason while some voluntary activities the banks carry out on behalf of government are also responsible for chronic losses.

Due to influence of the government high-ups, the state-run banks have to approve large amount loans to the corrupt businesses showing fake documents. Most of such loans become default, the putting the banking sector in trouble.

The loan forgeries have come to spotlight after the revelation of Hall-Mark Group and Bismillah Group scams which left a long time scar on the country's banking sector.

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