Government's bailout plan for banks

GOVERNMENT has decided to allocate Tk 20 billion as part of its bailout plan to replenish capital shortfalls of certain banks. Sonali Bank alone needs an amount of Tk 60 billion for capital replenishment as many of its loans have turned out to be non-performing ones. Moreover, the government is pushing the Investment Corporation of Bangladesh (ICB) and four state-owned banks to purchase shares of a private bank that is facing liquidity crunch due to irregularities in approval and disbursement of loans and advances by directors. It does not seem to be justified to inject capital in a private bank hit by widespread corruption especially at a time when the state-owned banks are facing capital shortfalls. As was observed in the past, condition of financial institutions went from bad to worse due to government role. Hence, such a decision needs to be reviewed and reassessed. It was revealed only recently that Janata Bank earlier sanctioned and disbursed loans amounting to Tk 55 billion against a single borrower who later failed to repay. The replenishment sum is nothing but tax-payers' money. Since tax burden on people has been increasing every year, tax payers' money should be spent more judiciously. Moreover, the replenishment amount is being given unconditionally to the banks without making the authorities of banks accountable. The common people have to face its impact through various taxes imposed by the government. The government is also creating a bad precedence for the banking sector - thereby creating an impression that the government will rescue any bank or financial institution in trouble notwithstanding the fault of its own. The government through central bank shall be the lender of the last resort, but not before taking those responsible to task for their part in the crisis.

Mohammad Zonaed Emran

A banker