Licence for new banks

The Bangladesh Bank has approved three new private commercial banks to launch their operations. The decision comes at a time when the banking industry is facing serious challenges on account of defaulted loans and good governance issues. The non-performing loans are soaring to an unexpected level to about Tk 970 billion. Moreover, some fourth generation banks are not performing well, though it was thought that the banks would get a firm footing in the industry by contributions like channelling bulk remittance.

Some fourth generation banks along with old ones are passing tough times as those are encumbered with gross irregularities and flouting regulatory rules. Some new banks along with old ones are involved in various scams.

Economists and bank experts cautioned that the existing 59 banks are a burden on our economy and in the present situation inclusion of more banks will escalate the burgeoning non-performing loans and will jeopardise the economy. People's confidence in the financial institutions has been waning due to big scams in which hallmarks, Bismillah, Anontex, Crescent Leather, Farmers Bank etc. were involved. People are withdrawing their deposits from financial institutions because of lower interest rates on deposits, lack of credibility of financial institutions and various scams.

There has been an unhealthy competition among the banks for hunting and procuring deposits. Furthermore, the government and some private banks are facing capital shortfall due to loan default.

An argument is advanced that approval of new banks is required for expanding banking facilities to unbanked people. If it is the point, then the purpose can be served through expanding existing bank branches and agent banking. Through agent banking, many banks are providing banking facilities in the remote areas of the country.

Considering the present economic situation, approval of more banks is suicidal for our economy. It will increase defaulted loans, scams and irregularities.

Mohammad Zonaed Emran

Dhaka

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