• Wednesday, Dec 11, 2019
  • Last Update : 05:18 am

No more bailouts

  • Published at 12:00 am August 27th, 2019
Can a banking commission remedy banking sector problems?
Dhaka Tribune

Private banks have outperformed SOBs in literally every area

Better late than never. 

It is good to see the government finally take a hard stance against loss-making and poorly performing state-owned banks, with Finance Minister AHM Mustafa Kamal saying yesterday that SOBs would no longer be recapitalized by the government.

State-owned banks, then, must learn to function efficiently, earn profits, and pay taxes just like everybody else.

In other words, they must perform or perish.

In the past, Bangladesh’s endless loss-making SoBs enjoying refinancing, or recapitalizing, year after year to cover losses, creating a vicious cycle where banks were simply not held accountable.

But it is good to know that times of coddling SoBs are gradually coming to an end, although the problem of non-performing loans will persist for some time; however, the finance minister has said the issue will soon be settled, which gives us some hope.

Thousands of crores of public money has been wasted in propping up banks which have not shown any signs of cleaning up their act; recently the FM instructed all loss-making branches of Basic Bank to shut down, and we hope this will be extended to other banks as well.

The simple fact is, private banks have outperformed SoBs in literally every area -- not only do they consistently demonstrate greater efficiency, they tend to be free from political influence, and the high degrees of corruption which afflicts state-owned banks.

At this critical juncture in Bangladesh’s development history, it is more important than ever to have a robust banking sector, and the government’s recent move gives us hope that the matter is being seen with sufficient urgency.