One of the predominant issues with Bangladesh's banking sector is its penchant for handing out bad loans, which not only keeps the entire sector as the veritable bad apple that it has been for ages but also hurts our overall economy in the long run.
The International Monetary Fund recently cautioned that the inordinate amount of non-performing loans have the potential to trigger grave risks to our national banking infrastructure and advised the government to set up tighter restrictions to curb this malpractice going forward. Needless to say, this is an advise that the administration and our financial institutions should absolutely not sleep on.
According to the IMF's assessment, the volume of bad loans stands to increase to Tk30,000 crore if the rescheduled credits count as non-performing loans. This is not a figure that we wish to reach, let alone cross. The fact that bad loans have been increasing ever higher can be chalked up to corruption, nepotism, favouritism, and political might -- factors which have continued to wreak absolute havoc when it comes to borrowing pushing the entire sector to the absolute edges of collapse.
To that end, few banks are as culpable as our state-owned banks. These banks have lent aggressively beyond their deposit amounts, thus overshooting the advance-to-deposit ratio that is to be maintained by all banks.
Letting ill-intentioned financial institutions get away with their ceaseless malpractice makes absolutely no sense for a nation with lofty economic ambitions. The authorities concerned must throw the book at these institutions if it wants our banking sector to have any fighting chance of recovering from its current state.
Our banking sector needs to start punishing bad borrowers and incentivizing the good ones if it wishes to avoid wrecking itself.
