Malgovernance, impunity key factors

Malgovernance and improper management, fuelled by political interventions, are the factors behind the present sorry state of the banking sector of Bangladesh, a former central bank governor has said.
A culture of impunity and undue benefits to loan defaulters and their allies in banks are also liable for this situation, according to Dr Salehuddin Ahmed.
"Governance and management failures are in place, because of which we see problems like corruption, money laundering and (loan) defaults."
Dr Ahmed made the observations at a public lecture on the country's banking sector at United International University (UIU) in Dhaka.
The UIU School of Business and Economics hosted the session as part of a public lecture series styled 'Bangladesh Corpus 2024'.
The noted economist gave a brief outline of the sector, which has become much vibrant after 2006 with the rise of digitalisation, use of information technology and many other tools.
Necessary guidelines, norms and laws are there for the banking sector, but it largely lacks compliance of conventional rules, according to him.
About the recent merger of banks, Dr Ahmed said the merger of the banks has not been directed by the Bangladesh Bank (BB) in a proper way.
"Actually, there is scope to restore weaker banks through setting proficient boards, employing independent directors and hiring right professionals."
Highlighting policy failure with default-loan regulations with improper mechanisms to reschedule and restructure them, thereby fuelling corruption, he said borrowing has become a business model at present.
"Borrowing, increasing your money, making foreign trips and defaulting on loans has become a smart business model now," he went on to say.
With only a 2.0-per cent repayment, one can become a free man now, according to the former BB governor.
"The central bank is giving concessions day by day, whereas nobody is paying back."
Even the board of directors at most private banks are not competent, they sit there and provide loans without following the norms, says Dr Ahmed.
He suggested that the Bank Company Act be amended be amended to minimise the scope for incompetent directorships. Suggesting a way forward for the banking sector, the former governor said the central bank should focus more on ensuring governance to reinstate the sector.

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