Tensions grip BB, banks, affecting operations

Governor, deputies abstain from central bank amid discontent

JUBAIR HASAN | Published: August 08, 2024 23:45:10

Tension runs high in the banking industry amid unrest let loose by discontents after regime change following an unceremonious exit of the immediate-past Prime Minister, Sheikh Hasina.
As a matter of fact, not only the banking operations but also the regulatory roles have seriously been affected as top brasses of Bangladesh Bank (BB), including the governor, stayed away from office amid unrest set off by a group of aggrieved officials.
On the other hand, protests flared up in several commercial banks on Thursday, and fear stoked up such demonstrations might spill over to other banks.
The banks' officials are demanding cancellation of illegal appointments, punishment of bank owners who are involved in money laundering and irregularities along with reinstatement of those who faced termination in the past several years.
Simultaneously, as a group of big borrowers either fled the country or went into hiding shortly after the regime shift, fears intensified about further NPL (non-performing loan) buildup in the banking sector, according to the officials and bankers.
Money-market analysts term the situation prevailing in the financial sector 'very concerning' and asked the interim government led by microcredit pioneer and Nobel-laureate economist Dr Muhammad Yunus to take immediate steps to bring discipline in the banking operations.
Speaking on condition of anonymity, a BB official said the central- bank governor, four deputy governors (DGs), the policy adviser and the head of Bangladesh Financial Intelligent Unit (BFIU) are not attending office because of the ongoing unrest.
"Because of their absence, the regulatory affairs have been impacted seriously. Once the interim government takes charge, hopefully, things will improve and normalcy will return," the official said.
Meanwhile, the central banker said, the BB has asked all the government and private banks of the country not to allow cash withdrawals over Tk100,000 for Thursday (8 August).
The urgent direction was issued as many checks without names started to arrive at banks. On the other hand, there has been a lack of security at banks and ATM booths due to the resignation of Sheikh Hasina as prime minister.
Furthermore, the BB official said, tension continues rising in several banks amid troubles kicked off by the officers of the commercial lenders concerned, disrupting banking operations there.
Managing director and chief executive officer of Mutual Trust Bank (MTB) PLC Syed Mahbubur Rahman says the banking industry passes through a tense time because of ongoing protests in some banks.
But the most concerning part is there are many big borrowers who either left the country or went into hideouts soon after the regime shift. "We don't know future of the credits. This will undoubtedly create more pressure on the liquidity," he adds.
Former lead economist of World Bank's Dhaka Office Dr Zahid Hussain notes that such situation only arises at a time when the regulatory body is not functioning.
The economist points out some features of the change brought about through the student movement. In the absence of any government and leading law-enforcement agencies, he says, the students come to the streets and take charge of traffic management--and it is functioning well.
"With absence of top brass in the BB, a regulatory vacuum is created that cannot be replaced by the students," he says.
He suggests the interim government, once formed, should take immediate steps from the day one to bring discipline in the banking operations through filling the vacuum with qualified people.
"What we are observing in banks is just a mess in this government-less time," he says.