The country's financial sector has grown by leaps and bounds during the past decade. Thirteen new banks and an equal number of mobile financial service (MFS) entities have entered the financial market during that period. The authorities have also permitted a couple of 'digital banks' recently.
At the moment, 61 banks, 35 financial institutions (FIs) and five non-scheduled banks are in operation in the country. It is not that the number of operators has only gone up in the financial sector, but also the volume of transactions, both local and international, has also increased manifold. Deposits in banks have more than doubled. The volume of lending also tripled during the past decade. According to a report published in a leading vernacular daily, deposits with the scheduled banks, which was nearly Tk7.5 trillion in 2014-15, rose to Tk17 trillion in the financial year (FY) 2022-23. Similarly, lending rose to Tk15 trillion in FY 2022-23 from Tk 5.5 trillion in 2014-15.
The financial transactions handled by the FIs and mobile financial services annually were also worth billions of taka.
The proliferation of banks and FIs has prompted many to raise questions about whether the country needs so many banks and FIs. Allegations have it that many banks and FIs got licences in political consideration, leading to the creation of an overcapacity in the financial sector. The economy at its present size does not require so many banks or similar other institutions.
What appears surprising is that there were no serious efforts to build necessary institutions and structures capable of effectively supervising an ever-expanding financial sector. Nor has the government ensured the availability of adequate and competent human resources and logistics to keep closer watch over the activities of many banks and FIs.
Take the case of the central bank. The number of officials and employees has remained unchanged during the last decade. The shortage of human resources coupled with slow technological expansion has led to poor regulatory/supervisory activities on the part of the central bank and some units under its control.
The cases of loans and other irregularities in the financial sector have been on the rise in recent years. This development is linked with the permission given to a section of people of questionable background to open banks or FIs. The central bank is not in a position to manage the financial sector effectively. It cannot do so, for it does not have the required capacity. Some critics, however, find the lack of seriousness and sincerity of the regulator concerned to stop the rising incidents of loan scams and other irregularities in the financial sector.
Undeniably, the cases of irregularities, financial or otherwise, in the financial sector have gone up substantially in recent years. A few of those were so massive that any regulator worth its name could hardly restrain itself from taking appropriate actions. Unfortunately, regulatory actions in Bangladesh are found missing or insignificant, primarily because of interferences of all sorts. In some cases, the Bangladesh Bank is found to be helpless in taking actions against violators of rules and regulations because of the latter's strong links, political or otherwise, with the ruling class. Some strong-willed people occupying the top seats of regulatory bodies could have acted differently. But such people are not usually chosen for those positions. Under the prevailing circumstances, the regulatory bodies in Bangladesh, besides beefing up their capacity in terms of human resources and logistics, need strong-willed men at their helm to deliver goods.
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