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Time to stop coddling state-owned banks

  • Published at 12:08 am August 4th, 2019
piggy bank

Why must SoBs be protected like this?

It is good to see the finance minister finally instruct the new management of Basic Bank to shut down -- for good -- all the branches that had been incurring losses for three consecutive years.

This directive is long overdue, no doubt.

Time and again, the government has coddled and bailed out loss-making state-owned banks, hoping things will change; but they never do, and the bad loans just pile up.

The ailing Basic Bank had received thousands of crores from the government in an ill-advised recapitalization program, but their poor performance continues.

For Basic Bank and other underperforming state-owned banks, irregularities, embezzlement, and loan scams are often met with special treatment, and it is the tax-paying public that ends up footing the bill. 

Why must SoBs be protected like this, when the private sector has to perform or perish? Indeed, private banks have outperformed SoBs in every aspect: Not only do they consistently demonstrate greater efficiency, but they tend to be free from political influence and the corruption that tends to plague state-owned banks.

Bangladesh is at a crucial juncture in its economic history, as we stand on the verge of finally becoming a middle-income country, and a formidable player in global business.

However, those things cannot be achieved if first we do not fix our banking sector, as a stable, effective, and efficient banking system is absolutely imperative for an improvement in the nation’s economic stability.

Enough money has been drained on white elephants like loss-making state-owned banks; it is time for a systemic change, and it is time to shut some of them down.