CPD calls 2017 a 'year of banking scam'

The Centre for Policy Dialogue (CPD) dubbed 2017 a 'year of banking scam', citing lending irregularities, embezzlement, NPL buildups, recapitalization, and ownership shakeups to justify such epithet.
On a further note of dissatisfaction, the policy think-tank says there have been no effective remedial measures to prevent such practices even in the ongoing year 2018 either.
"…2017 will be identified as the year of banking scams in the country, and we are not seeing any remedial measure to this end even in 2018," said Dr Debapriya Bhattacharya, a distinguished fellow at the CPD, told journalists at a briefing programme held Saturday at the CIRDAP auditorium in Dhaka.
The CPD organised the media briefing to launch its first report on the state of the Bangladesh Economy in the current financial year (FY) 2017-18 that traced the trends in crucial macroeconomic correlates during the first half of the fiscal.
It found job-scant economic growth and widening inequalities, particularly in asset possession.
In the media briefing the Centre pointed out rising trends in non-performing loans (NPLs, high concentration of loans, provisioning shortfall among other odds in the sector.
"The loan remained concentrated to few borrowers and those are in the NPL bracket," Dr Bhattacharya said.
He said: "The taxpayers' money had been injected into the state-owned banks as recapitalisation to meet their capital shortfall."
The CPD mentioned that Tk 157.05 billion spent on recapitalising the banks during 2009-2017 period was equivalent to half the construction cost of Padma Bridge.
It deplored that the new-generation banks permitted on "political considerations" also failed to be effective in the banking sector.
The CPD also cited instances of siphoning of money allegedly through some private commercial banks.
"We have seen such an incident in a recent period," Dr Bhattacharya told the reporters.
He said actually there was no reform in the banking sector rather the government went on a "reverse path" by expanding family members' hold and their tenures on the banks' boards.
And there were changes in the ownerships of banks through "administrative process".
CPD executive director Dr Fahmida Khatun moderated the briefing while its research fellow Towfiqul Islam Khan presented the keynote paper.
While presenting the keynote, Mr Khan said performance of the banking sector had been disappointing in recent times.
The banking sector has been plagued by financial scams, nonperforming loans, inefficiencies and slack monitoring and supervision, the paper noted.
He pointed out that two detrimental amendments of dubious nature have been proposed to the Banking Company Act: tenure of Board of Directors is proposed to increase from six to nine years and up to four family members would be allowed to be on the Board, instead of existing two.
The CPD presentation pointed out that embezzlement of public money by a handful of corrupt persons and an escalation in financial crimes indicate that the banking sector is in dire straits.
It cited the case of Farmers Bank which is now "on the verge of collapse after being hit by scams and scandals".
"The situation in Famers Bank is getting worse every day and may soon be as bad as Oriental Bank," Mr Khan said in the keynote.
The CPD presentation cited cronyism in the economy, a practice of partiality in awarding jobs and other advantages to friends, family relatives or trusted colleagues, especially in politics and between politicians and supportive organisations.
Dr Bhattacharya pointed out an economic paradox that shows though the economy has advanced at decent rates in the past one decade, there are growing trends in unemployment, slow poverty alleviation and rising inequalities.
"We are seeing a decent growth in the past one decade, but the unemployment, poverty and inequality are beneath this growth!"
He particularly cited pervasive asset inequality. "The reasons are clear before us as there was no repayment of bank loans, money taken out from large projects through contractors…"
The CPD senior feels this is high time the authorities thought about the quality in growth.
"This is serious matter as it cannot lift up the poor to its next level."
Dr Bhattacharya said there are many studies that the high inequality both in income and assets today or the next will impact upon growth.
He identified three key reasons for this situation of the economy: lack of reform initiative, lack of coordination among key organisations - the central bank, the National Board of Revenue and the Bangladesh Securities and Exchange Commission-and lack of proper leadership by the Ministry of Finance (MoF).
"There are many instances that the MoF had failed to perform its due jobs following pressures," he told the press meet.
However, he advocated conservative approach to combat the pressures in the election year. The loan flow might be constrained, he said.
About inflation, another major macroeconomic indicator, the CPD aired doubts about the official data.
Dr Khandker Golam Moazzem noted that if the food inflation rises, then the non-food inflation will also as a lag effect.
"We have doubts about the government statistics on non-food inflation, and if that part were calculated properly, then the overall inflation would rise further," he said.
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