Belated actions in Agrani

The removal of the managing director (MD) and chief executive officer (CEO) of the state-owned Agrani Bank on June 30 last and arrest of the acting managing director of the same bank on the same day stirred up surprise in the country's financial world. The unprecedented events caused further damage to the image of the bank that needs immediate infusion of fresh capital.
The immediate past managing director and chief executive officer of Agrani Bank, Syed Abdul Hamid, was removed by the government for his alleged abuse of power in the disbursement of loans worth Tk. 7.92 billion. The Bangladesh Bank (BB) recommended his removal following an investigation. However, the removal came only 10 days ahead of the scheduled expiry of his service contract.
The Anti-corruption Commission (ACC) arrested Mr. Mizanur Rahman, who was given the charge of MD and CEO of the bank following the removal of Mr. Hamid, for his alleged involvement in sanctioning a loan amounting Tk.1.08 billion to a firm to construct buildings having no approved structural designs. The loan money was used for some other purposes by the borrower concerned and at one stage it turned classified. The irregularities in the disbursement of the loan were detected in 2014 and the ACC took up its own probe in 2015.  There is no reason to assume that the government was unaware of the ACC probe. Yet the government appointed Mr. Rahman as acting MD and CEO of the bank.
 The developments involving two top officials of a state-owned bank highlight the government's indifference towards state affairs in dealing with the public sector units (PSUs), the banks in particular.
The state-owned enterprises (SoEs) have always been an embarrassment for the government for their poor performance. Some have been responsible for causing continuous haemorrhage to the national economy. The government has divested a few - but with much reluctance. Though many more are strong candidates for divestment, the authorities prefer to ignore such a need.
Banks are not like other organisations. They being sensitive entities need specialised management and care. Mismanagement and lack of care usually land them in troubles of serious nature. That is what has happened to the public sector banks in Bangladesh.
All banks were nationalised soon after the independence of the country. Poor management and political interference had emerged as serious problems for normal operations of these banks. The situation had turned really bad in the early eighties when default loans reached an unprecedented level and the unruly trade unionists started interfering in almost all matters, including loan decisions and postings and transfer of banks' officials and employees. Some drastic measures adopted by the then government had brought the situation under control to a large extent. With no private banks during that period, the public sector banks dominated the country's financial world.
With donors' assistance, financial sector reforms were initiated at least twice since then to streamline the country's banks and financial institutions. Meanwhile, private sector banks started emerging from the early eighties and their number increased greatly after the country's transition to democracy in 1991. The domination of the public sector banks was eventually gone and their private sector counterparts now rule the roost.  
Many had expected that in a competitive environment created through the entry of a large number of private banks, the public sector banks would try to correct their past mistakes and perform better. But such an expectation has largely been dashed. A number of loan scams eroded their image among the public and their classified loans continued to soar, leading to major shortfall in their capital. The government that is partly responsible for the present poor state of state-owned banks has been replenishing their (banks) capital base from time to time. The finance ministry has always expressed its deep annoyance at the dismal performance of the public sector banks, but with much reluctance keeps financial provision in the annual national budgets for capital replenishment.
The government has always been averse to the idea of giving up its control over the state-owned banks. And the central bank has been interested in gaining control over the boards of directors of the state-owned banks and authority to approve appointment and dismissal of their key officials the way it exercises control over the boards and top officials of the private banks.
The truth is that the government could never do justice to its duties and responsibilities towards the public sector banks. Such failure has, thus, given rise to all the problems, administrative or financial, these banks have been facing all along.
But the situation cannot go on like this. There has to be improvement in the management of these banks. Through an amendment to the relevant law, the central bank has been empowered to take action against the MDs of state-owned banks. The removal of the Agrani's MD is the outcome of that change. The situation could have been otherwise had the authority been vested in the government. Besides, the ACC is now far more active under its new chairman. The cases of loan irregularities that have been awaiting actions for long have now been activated.
The government should do something to ensure better performance by the banks under its ownership. If it is unable to oversee the activities of these banks properly, it should explore alternative measures such as divestment or far greater control of the central bank over their operations.
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