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Banking in crisis

  • Published at 05:27 pm December 18th, 2017
  • Last updated at 12:45 am December 19th, 2017
Banking in crisis

The popular adage, “Money makes the world go round,” isn’t too far from the truth.

The financial sector of any modern economy is one of the most important sectors, as it essentially facilitates the operation of the entire system. Wherever money goes, everything else follows. As such, the development and direction of our nation depends on it.

The banking sector, therefore, needs to be properly regulated and supervised by an independent body, which is usually the central bank in most countries.

But in Bangladesh, in recent years, our central bank seems to be losing control of the sector. One such example is the government’s decision to override the Bangladesh Bank and allow three new banks into the sector.

Due to a lack of enforceable regulation, a single business group now controls eight banks.

The banking sector is also struggling with defaults on loans.

At the end of September this year, the amount of default loans had reached a staggering Tk80,000 crore; most of the bad loans were made to nine banks that came into operation only after 2013.

Given how those nine banks have already been destablising the sector, it is important that we put more stringent rules on how the sector functions.

As it stands, banks, especially state-owned ones, are disorganised and corrupt, and need to brought under control.

The burden of the bad loans will ultimately fall on ordinary citizens -- either directly on the meagre three million tax-payers whose backs are already breaking under the weight of supporting 160 million people, or indirectly, through inflation and a myriad other ripple effects.

It should be a matter that concerns us all when leading economists, experts, and former Bangladesh Bank governors all disagree with the government’s decision to add more banks to our already unbalanced banking sector.