But, of late, it appears this element of public trust is no more important or relevant for banking service. Otherwise, how is it possible that about Tk922.61 billion or close to around Tk1.0 trillion was embezzled, as claimed by a policy think tank in its report titled, 'State of the Bangladesh Economy in FY 2023-24', from the banking sector over a period of 15 years? The misappropriation of such a colossal amount of public money was done through misuse of power. The amount so stolen from banks is equivalent to 12.1 per cent of FY24's national budget and 1.8 per cent of the country's Gross Domestic Product (GDP), the report further said. Robbing the erstwhile private banks, namely, Farmers Bank or National Bank, of tens of billions of taka through irregularities or siphoning off huge funds from a number of Islami banks through fake Letters of Credit (LCs) are glaring instances of the current deplorable state of the country's banking industry.
How it happened. Suppose some individuals organise the required paid-up capital of Tk5.0 billion to establish a private bank. Once the bank comes into existence, unsuspecting clients seeing attractive offers deposit tens of billions of taka with the bank. The directors of the bank then become de facto owners of the depositors' money. If the bank is established by fraudsters driven by evil motive, the process of stealing public money begins in the name of lending and investment. Former finance minister AHM Mostafa Kamal once (September 2020) told a question-answer session in parliament that directors of different private banks took loans amounting to Tk1732.30 billion from their own and other private banks. A section of directors first withdrew the amount of money they were permitted according to the central bank policy (which is not more than 50 per cent of their shares) as loans. Then they took loans against the names of their relatives or even fictitious individuals or companies. Also, they colluded with top executives of public banks or directors of other private banks to siphon off money from the respective banks. The loans so taken from the banks were never returned. On defaulting, those are written off. Who is going to challenge them since they are the final arbiters when it comes to approving of, restructuring or writing off the loans?
So, it is hardly surprising that the non-performing loans (NPLs) in different banks of the country, according to an estimate, tripled in the last 10 years from Tk427.25 billion in FY12 to Tk1456.33 billion or more than Tk1.45 trillion till the second quarter of FY24. However, if loan amounts held in specially mentioned accounts under court injunctions and rescheduled loans are included, the NPL amount will come to Tk3779.22 billion or close to Tk3.78 trillion. Adding to it the unpaid debts amounting to Tk1782.87 billion or Tk1.78 plus trillion awaiting settlement at the money loan court, the whole NPL amount rises to a whopping Tk5562.09 billion or well over Tk5.56 trillion, according to the findings disclosed recently by the local economic policy think tank, Centre for Policy Dialogue (CPD). In fact, banks are being thus used as mere vehicles to rob both public and private banks of their funds with tacit political support for the creation of a section of crony capitalists, or the so-called oligarchs. Consider the ease with which some bankers have been amassing fabulous riches. They are doing it at the expense of the general depositor's money. It appears, the common depositors are being held hostage by the banks' top executives and directors and not the other way around!
It is not only through outright bamboozling that the common depositors are losing their savings. They are also being made to lose their money deposited with banks by paying interest at a rate that is lower than the rate of inflation. As calculated by the aforementioned policy think tank and reported at a recent discussion, since March 2020, real interest on their deposits (due to inflation) rate fell to 0.1 per cent in February 2020 and in August 2022 and May 2023, it went to negative territory (to as low as minus 5.5 per cent). Thus the depositors were losing their savings by keeping those in banks. So, it is not surprising that many people withdrew their bank deposit and preferred to keep those at home. This does not bode well for the banking or the financial industry. Before it is too late, the Bangladesh Bank should rise to the occasion to restore the common depositors' trust in banks. To that end, the first step will be to ensure transparency about the banks' financial health. The public should be able to know from the media or the banks' and central banks' websites how their savings and investments are being protected. This is how the banking sector can regain public trust.
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