Banks and news media

This letter is in reference to an opinion piece titled 'Banks and news media' that was written by Zaid Bakht and published in the Financial Express on February 12, 2019. In the article, the author pointed out that sometimes reports and articles are published in newspapers with sensational headlines to attract readers. I agree with the author to some extent that some reporters often exaggerate banking sector reports due to lack of knowledge about banking. He provided a good example through the issue of treasury that was wrongly presented by a reputed media. Treasury of financial institutions borrow from call money market for short term to meet their liquidity requirements. The banks with excess liquidity lend the funds to borrower banks for one day or overnight. But the rate is comparatively low. If any bank has excess liquidity they opt to lend some funds and the bank that needs the cash tries to purchase the money overnight. Government banks usually have excess liquidity as they have more idle funds. As government banks are the market leaders, they are usually the source of liquidity for peer banks during dry or bad times.

The author has pointed out that Agrani bank has generated substantial income through interest from call money. The interest income from call money market is poor compared to interest income generation from loan and advances. I think, rather than doing this with excess liquidity, banks should invest their excess liquidity to profit-generating sectors like investing in government bonds, subordinate bonds and loans and advances after meeting their liquidity.

There may be lots of arguments against the local media outlets. But it should be noted that some leading media houses have revealed many recent scams involving various banks in the country. Hallmark, Bismillah and very recently, Crescent Group scams have come to the fore, thanks to media reports. There may be lack of professionalism among some media people. They need to be cautious while reporting about financial institutions. At the same time, they need to be properly trained.

On the other hand, the board and management of banks should carefully control and steer their banks in the right direction through proper governance. They should ensure that fraudulent elements are not able to take advantage of their financial institutions and workforce to swindle money.

Zonaed Emran

A banker