A visiting team of International Monetary Fund (IMF) wants initiating corrective measures into the country’s banking sector to stop further deterioration of their financial health.
The review team of the Extended Credit Facility (ECF) programme has advised the authorities to undertake separate programmes for the state-owned commercial and specialised banks as well as the private banks to stop corruption in the financial sector.
It also wants the finance ministry to give more authority to the central bank for enhancing its direct supervision over the banking sector.
According to a finance division official, the team further advised to fix new criteria on how to appoint chairmen and directors of the state-owned Sonali, Janata, Agrani, Rupali and other specialised banks.
“Authorities concerned will check whether the board of directors of the state-owned banks were appointed on political consideration or not? If so, then how the politically appointed directors are working in their respective boards?” said the official.
IMF team came up with the volley of questions at a series of meetings with the finance division, Finance Secretary Mahbub Ahmed, banking secretary M Aslam Alam and Bangladesh Bank Governor Atiur Rahman.
The six-member team led by Rodrigo Cubero, which is now visiting Dhaka to review the six-tranche ECF, will stay here till today.
The IMF has released about US$704.3m in five installments.
But, the lender later on imposed four conditions, mainly for the banking sector, against the release of the next tranche under the ECF scheme worth around $1bn. The conditions include bank exposure into the local share markets, forex regulation act and automation of the state-owned banks.
“Still, we have two years in hand to reduce the bank exposure limit from 40% to 25%, which is one of the major conditions of the ECF,” Aslam Alam told the Dhaka Tribune. Other ECF conditions, including the foreign exchange regulation act and automation of the state-owned banks, will be executed within the ECF timeframe, he added.
As per the ECF condition, Bangladesh Bank had last year asked all the commercial banks to reduce their capital market exposure to 25% of their equity (paid-up capital, reserve, retained earnings and share premium) by July, 2016 in accordance with the new bank company law.
A total of 11 commercial banks are still holding their bank exposure limit 50% of their equity in share markets, said an official of Bangladesh Bank. Currently, the amount of the total loan defaults is Tk58,000 crore, while the state-owned banks holds Tk37,000 crore.
During the first week of this month, Finance Minister AMA Muhith said there had been mistakes on the government part in selecting political people for the boards of state-owned banks.
Meanwhile, board of directors of the two state-owned banks – Sonali and BASIC – have been dissolved for big financial scam committed by Hall-mark and other financial irregularities by former chairman of BASIC bank and former law marker of Jatiya Party Sheikh Abdul Hye Bacchu.
