Sustainable economic conditions are indicative of a robust banking system. Conversely, a weak banking system signals an economic downturn. Unfortunately, the banking sector in Bangladesh has been grappling with numerous issues for a significant period. Escalating default loans, management crises in commercial banks and instances of corruption pose major challenges to the sector. Undoubtedly, banks serve as the backbone of a nation's economy, playing a pivotal role in its economic development.
Over the past decade, the banking sector in Bangladesh has been marred by significant financial scandals, greatly affecting bank management. According to a report by the Center for Policy Dialogue, a staggering amount of Tk 92,261 crore has been embezzled from the banking sector in Bangladesh over the last 15 years. This amount, obtained through irregularities, accounts for more than 12 percent of the country's annual budget. Global studies also reveal that an average of $700-800 billion is illicitly smuggled out of Bangladesh each year.
These incidents underscore the lack of good governance in the banking sector and the inadequate enforcement of policies and laws. Commercial banks bear the responsibility to uphold good governance and maintain order in the industry, yet they have repeatedly failed to do so. The infiltration of familial influence in privately owned banks, money laundering, bank-centric irregularities, and corruption have further weakened the sector, negatively impacting the economy.
Unfortunately, the authority of Bangladesh Bank, the central bank of the country, has diminished due to various reasons. Bangladesh Bank's primary role is to effectively prevent any deviations or negligence within the banking sector. However, it has been unable to fully implement its policies and laws, which is disheartening. Even the largest Islamic bank in the country has been affected by these issues.
Given these circumstances, it is imperative to implement timely and visible functional reforms within the banking sector and financial institutions. These reforms should address the underlying issues and restore confidence in the banking system, ultimately contributing to the stability and growth of the economy.
Habib Ullah Rifat
Student, University of Chittagong
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