Chairman of the Sonali Bank Ltd, Dr A H M Habibur Rahman, has resigned eight months before the expiry of his tenure. This does not sound well either for Sonali Bank or the banking sector in the public sector.
This Board of Directors of the Sonali Bank was reconstituted after the Hallmark loan scam. The previous board came under severe public criticism. Questions were also raised about the soundness of the policies which guided the formation of boards of the government-owned banks.
The Board of Sonali Bank was then headed by a seasoned banker who, until then, had some reputation in the banking arena.
In the case of the Hallmark scandal, the whole system of sanctioning and monitoring loans had totally failed. It was also alleged that a very strong political person visited the Rupashi Bangla branch of the bank, which was involved in the scam, frequently and influenced the whole episode. While the concerned bankers have been taken to the dock, the political person has not yet been indicted.
Apparently taking a lesson from the Hallmark scandal, the government chose to think that teachers and/or bureaucrats would fit in best to head the boards of state-owned banks. Since then, except in one or two cases, bankers are not appointed to head the board of the government financial institutions. But in our experience, a political government usually appoints persons with political bias. That is the whole problem with the successive governments, with some exception of the caretaker ones.
The boards of the government-owned banks are manned overwhelmingly by non-professionals - bureaucrats, often without any banking background, people who enjoy little business reputation but have political bias, former student leaders who fit into the political equations of the government in power, etc.
Dr A H M Habibur Rahman, a former professor of Dhaka University, who is now Dean of the Business School at Prime Asia University, accepted the offer of becoming Chairman of the Board of Sonali Bank, possibly, with the hope that he would be able to translate some of his ideas of finance he has mastered in his education and in teaching, in the policies of the bank! He eventually came face to face with the reality and decided to quit. The Finance Minister was abroad and the professor placed his resignation letter with the Managing Director of the bank. The other side of the story may be that, he was asked by the appropriate quarters to resign!
I met once Dr. Habibur Rahman while I was working at the Head Office of the State Bank of Pakistan at Karachi. He visited me to collect banking data for his PhD dissertation in a UK university. I found him very suave and gentle. Back in Bangladesh, I have not so far heard anything bad about him.
When he was appointed to the Board of Directors of the Sonali Bank Ltd, I confided my feelings to some of my former colleagues in the banking sector. I wondered how long he would survive in the board.
The dictated loans and transfer of officials on special considerations have become endemic with all the publicly-owned banks and as a result, non-performing loans are growing and defaults are increasing. Bangladesh Bank's targets for recovery of bad loans of individual banks remains unfulfilled.
Is there any hope of the banks coming out of the clutches of politicisation? As we understand, the government is not interested to privatise any bank in the government sector. But all know that, the banks so far privatised are doing fine.
Banking is the nerve of the financial sector. The banking sector contributes 3.0 per cent of the GDP (gross domestic product). If the government takes its hands off from the banking sector, its contribution to the GDP would be much more.
The government keeps these banks in the public sector to run their various programmes at a low cost. Because of the government's energy policy, POL (Petroleum, Oil and Lubricants) sector is heavily subsidised and is running accumulated losses. Because of their poor credit worthiness, no private banks would like to open their L/Cs. To do away with this, the import and distribution of POL may be privatised.
The Treasury function of the government also may be distributed to the private sector banks. The private sector banks would also like to take on these services provided these are on a cost-effective basis. Given a strong political commitment and proactive policies in this behalf, it is not at all difficult for any government to implement this policy.
The writer was Managing Director of various banks and financial institutions.
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