Many critical issues about management of the state-owned commercial banks (SoCBs) have been raised by various quarters in the recent times. Such issues relate to accountability, transparency and good governance. The latter, according to competent observers, are largely absent in these banks. It has recently been reported that financial health of five SoCBs is precarious. The condition deteriorated abruptly during the last six years.
High growth of defaulting loans, writing-off of a whopping amount of loans and big financial scams have taken place in the SoCBs during this period. The total amount of defaulting loans of four SoCBs, according to reports in the media, stands at Tk 190 billion and that of written-off loans, at Tk 150 billion. The amount of alleged misappropriation in the name of loans of SoCBs involves Tk. 110 billion.
Such reports are startling. In fact, scandals in the public sector banking were unearthed primarily by the media in recent years. The government then became somewhat pro-active about tackling such issues but its actions were too slow. The Bangladesh Bank, the country's regulatory body in the financial sector, was found to make some sounds. But the ministry of finance (MoF) demonstrated its confused stance on the issues. The minister concerned was, at times, hinting at possible harsh actions, sometimes defending the incidents and sometimes raising questions about the efficiency of the central bank. Very recently, it was first reported that the MoF would change the directors but not the chairmen of the Board of Directors of the SoCBs. However, the latter were also changed ultimately.
On Hallmark scandal of the Sonali Bank, the minister concerned had, first of all, accused the Bangladesh Bank of not taking appropriate measures at proper time and later he, as the media reported then, said that the volume of swindled money was not too big to be overly worried. When there was bitter criticism of political appointments to the boards of directors of SoCBs and specialised banks, the boards were reshuffled, mostly by taking political figures two years ago. On scrutiny, it has been found that the boards of directors of all SoCBs and other specialised banks had seven to eight political persons on each of them. Most of them, according to reports in the media, are former or present political leaders belonging to ther ruling party and its affiliated front organisations. Some of them are also reported to be heavily politically-tilted teachers at the level of public universities. The government was found appointing 70 persons on political consideration to the boards of the SoCBs in two phases-once in 2009 and the other in 2012.
Recently, the Finance Minister was reported to have admitted that he could not score success in respect of SoCBs and specialised banks. "We totally failed", so was the comment attributed to him by the media. He, according to reports in the media, acknowledged that the appointment of directors of the banks on political consideration was not a good step.
The Bangladesh Bank also did or could not play its due role in supervising and controlling the SoCBs and specialised banks. This, according to some relevant quarters, has happened, largely because of the existing 'dual control' over the affairs of SoCBs and specialised public sector banks. For this reason, the central bank is found to be saying both positive and negative things about such financial institutions but it has not been firm enough about taking proper actions. Recently, it was mentioned in an evaluation report that in 2013 only, the total amount of defaulting loans of four large SoCBs stood at Tk 10.99 billion. But what actions the authorities have taken to help redress this situation is not known to the people.
The Bangladesh Bank has otherwise ample powers under the Bangladesh Bank Order, 1972, the Bank Companies Act, 1991 and the Financial Institutions Act, 1993. It has not been found to exercise its authority effectively ever since its inception. This situation does tend to suggest that it works or is forced by circumstances, to work as a subservient body to the MoF. It is admitted that some provisions in the Bangladesh Bank Order, 1972 have been working against the autonomy of the central bank. Sometimes, the government issues such orders that curb its autonomy. In spite of some limitations, the Bangladesh Bank, being the central bank, needs to assert its power as the country's monetary watchdog by taking appropriate punitive and corrective measures against any errant bank or financial institution. Unfortunately, it has not been found doing so by itself in the case of some recent bank scams in SoCBs and other public sector bodies. Rather, it has preferred to send some of such cases straight to the Anti-Corruption Commission (ACC) without doing its own part of work to check gross irregularities in their operational sphere.
The disorder in the state-owned banking sector is adversely impacting the economic life of the nation. There are some definitional differences between default-loans and written-off ones. But misappropriation is outright thievery. All these take a heavy toll on the economy by way of drainage or wastage of a huge amount of public resources. The total amount of all these categories - default-loans, written-off ones and misappropriation -- of drainage amounts, according to a rough reckoning, is estimated at Tk 450 billion. This amount is more than half of the country's ADP (Annual Development Programme) outlay for FY 2014-15. How can the authorities concerned explain the wastage or loss of such a staggering amount of public money? How can this amount be replenished? What actions did the MoF or the central bank undertake? Neither of them can shift its own part of responsibilities onto the other side.
Moreover, the government is giving about Tk 5.0 billion to the SoCBs to meet their shortfall in relation to their requirements for capital adequacy from this fiscal's budget. About Tk 4.0 billion was earlier given to them in the last fiscal year. This is again public money. People do not know to whom the concerned ministry or for that matter, the government is accountable.
The writer is an economist and columnist. chowdhuryjafar@gmail.com
© 2026 - All Rights with The Financial Express
