To go by a report in this newspaper published on December 8, the central bank has authorised the disbursement of Tk 40 billion to five Islamic banks to meet their on-going liquidity crisis. Interestingly, they are also owned by the group of companies involved in the alleged financial scam. Indeed, it is apparent that there exists a liquidity crisis in all these banks, and why not? Depositors in these banks will be looking to transfer their money elsewhere and assurances, unfortunately, do not have the same effect as they once did. Ever since the Banking Act was amended a few years ago, which paved the way for several members of the same family to sit on the governing board of financial institutions (like banks), things have been going from bad to worse, year on year. Not a year goes by when some group of companies or individual's name doesn't hog the headlines as a loan defaulter.
Regardless of how bankers cook their books, there is no way to fool the eyes of the International Monetary Fund (IMF), which has asked for three banks to bring down their non-performing loans to around 12 per cent. Good luck with that, because a lot of luck and divine blessings will be required to get to that figure. While it is heartening to learn that the anti-corruption watchdog body, the ACC has launched an investigation to look into the scam, the question remains the same as it was back in 2018, when the former (deceased) finance minister, Mr. Muhith stood in parliament in August, 2018 and declared that the central bank had data on approximately 230,000 defaulters; companies and institutions that had defaulted on banks loans totalling around Tk1.31 trillion, until June 2018. Now at the end of 2022, one wonders where that total has gone up to.
The saddest part of the whole matter is that the bank in question was a stellar performing bank. Interestingly, the bank had an observer appointed to it by the central bank and for some inexplicable reasons, the individual was withdrawn in March 2020. Banking insiders and observers state that this allowed for various irregularities to take place since that time. As reported widely by the media, the Shariah-based bank allegedly became the playground for all sorts of shady business interest groups/individuals which took out loans without much oversight. These repeated scams should not come as a surprise to anyone because the bulk of the mega-loan scammers have not been brought to justice. Volumes have been written on how and why such irregularities can take place under the very noses of regulators, and yet nothing changes.
As rightly pointed out by the author of an opinion piece published in a contemporary on December 4, "The pattern seems to be, as the High Court observed, that an unholy nexus of powerful people has been aiding and abetting financial criminals - some of them powerful individuals or groups themselves - to commit crimes that are ruining the financial health of our banks and is pushing the overall financial sector into the abyss." While the Court has stated the obvious, we have miles to go before anything tangible happens that will restore people's confidence in the banking system. Going by the various media reports since the latest loan scandal erupted, rumour has run rife on social media that the banking system is tottering on the verge of collapse. Though far from the truth, people's imagination has run amok and there have been panic withdrawal of funds at the individual level, which has reportedly forced many banks to put a cap on the amount of Taka that may be withdrawn on a single day. If the authorities wish to restore people's confidence in the banking sector, the time has come to roll back the fateful decision taken a few years ago regarding bank ownership. Annul the amendment that allowed for private banks to become piggy banks of the powerful and well-connected families in society.
Bangladesh is no longer an island. Its economy is integrated into the global economy and the government has had to turn to foreign institutional banks (like the IMF) for budgetary support. Such institutions will be watching Bangladesh through the eye of a needle and insist on banking reforms that may be unpalatable in the short term, but in the long run will help the economy get back its bearings. Why does Bangladesh need prodding from foreign institutions to do what needs to be done? The rule of law should not be a mere electoral slogan, it ought to be the basis of the nation's existence.
mansur.thefinancialexpress@gmail.com