The battle internecine

The government owns a number of commercial and specialized banks. But it can hardly relish the ownership since most banks under its control are troubled ones.
The Ministry of Finance (MoF), which exercises control over the state-owned banks on behalf of the government, comes under attack from different quarters, including multilateral donors, due to unpalatable developments involving these banks.
The ministry is very often accused of mishandling the affairs of these banks and appointing incompetent people to the boards under political consideration. The accusation is not entirely unfounded. The incumbent finance minister himself, following the unearthing of a number of loan scams, had admitted making mistakes in the selection of some directors for the state-owned banks.
Irony is that the chairman of Janata Bank, one of the state-owned banks, has accused the ministry of taking revenge against the bank for not complying with an 'undue' request.
The bank chairman in question, according to a report published in a Bengali daily last Tuesday, alleged, while laying foundation stone of a nursing college of the Bangladesh Diabetic Society at South Basabo in Dhaka, that the MoF had ordered suspension of the CSR (corporate social responsibilities) activities of Janata Bank for non-compliance with a request to provide funds for a 'boat race' programme in Sunamganj.
The bank chairman, who teaches Economics at the Dhaka University, also claimed that the letter sent by the ministry to the bank had made references to both the minister and the state minister for finance.
The Janata Bank reportedly has provided Tk.100 million to the Diabetic Society for the nursing college under its CSR programme. A memorandum of understanding was signed between the bank and the society on August 25 last.
However, the suspension of CSR programme was not made applicable to only Janata Bank. The finance ministry through a letter issued on August 28 also temporarily barred three other banks -- Agrani Bank, Rupali Bank and Bangladesh Development Bank (BDBL) -- from spending any fund on CSR activities.
But the Janata Bank had received a specific order to put on hold the amount of money allocated in the name of CSR in a board meeting held on August 25 last. The bank management was also asked to send details of the fund allocation process to the Banks and Financial Institutions Division of the MoF.
The reason the ministry cited for CRS allocation suspension was that the boards of some state-owned commercial banks allegedly were spending a 'significant' amount in the name of CSR to boost their individual image and the same was casting a negative impact on capital adequacy and overall provisioning capacity of the banks.
The fact that the state-owned banks are suffering from significant level of capital shortfall is amply supported by the central bank statistics. However, it varies from banks to bank. But it is hard to tell that imprudent spending on CSR programmes alone is responsible for giving rise to the problem of capital inadequacy.
It might have contributed to the problem, to some extent. But the prime reason for these banks facing capital shortfall is the substantial rise in default loans the large part of which has gone bad.
The boards of directors cannot shirk their responsibility on this account by blaming the bank officials.
True, it is hard for the bank directors to know the details of the borrowers. Yet it is the job of the boards to seek information about large borrowers and ensure that the bankers are diligent in preparing individual loan cases.
But the problem of default loans becomes unmanageable when directors start influencing loan decisions for personal gains or political reasons.
The current pitiable state of a number of the state-owned banks is largely due to this problem. When board members indulge in irregularities, bankers tend to take advantage of the situation and try to grab a few pieces of the cake for themselves.
Moreover, the government should not blame anybody but itself if the incumbent members of boards of the state-owned banks are found playing foul with banks' funds. The government, being the owner, chooses directors for the banks.
There are genuine reasons for the government being concerned about the quality of spending on CSR programmes. The institutional taxpayers, including banks and financial institutions, are entitled to tax exemption, to a certain extent, in the case of spending on CSR. So if funds are misspent on CSR by banks, it would amount to loss of both depositors' money and tax revenue payable to the government.
It remains to be seen how the MoF reacts to the allegation made by the Janata Bank chairman.
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