The recent dialogue hosted by the Centre for Policy Dialogue paints a grim picture of Bangladesh’s banking sector.
Economists and experts raise a critical issue – the oligarchs’ abuse of the system, jeopardizing good governance, transparency, and public trust.
This erosion of trust stems from multiple factors. Bangladesh Bank, the central bank, faces accusations of weakness in asserting its authority.
Influential figures exert undue pressure, leading to erratic policy changes and a lack of accountability for problematic banks
Dual policies and questionable merger decisions further fuel public suspicion.
The consequences are stark. Non-performing loans (NPLs) have skyrocketed in the past decade, exceeding Tk 377,000 crore when combined with stressed assets.
This includes loans categorized as “special mention,” hinting at potential bad debts. The situation is exacerbated by over Tk 177,000 crore deemed unrecoverable due to legal roadblocks.
The dialogue exposes deeper concerns. Mahbubur Rahman, president of the International Chamber of Commerce, raises the alarming possibility of one individual controlling multiple banks while simultaneously chairing the National Bank.
This blatant conflict of interest raises serious questions about oversight and accountability.
The discussion also criticizes recent central bank policies, particularly the interest rate and exchange rate hikes. Former governor Salahuddin Ahmed argues these decisions have burdened people and caused market volatility.
The inconsistency in currency valuations, with Bangladesh initially holding the Taka high and then abruptly devaluing it, highlights the lack of clear strategy.
Furthermore, concerns regarding relaxed loan rescheduling policies are raised. The reduced down payment requirement creates a riskier environment for banks.
Additionally, the pressure from influential figures on Bangladesh Bank undermines its ability to function as a truly independent regulator.
The proposed solution of forming asset management companies faces skepticism.
Experts like Anisul Islam Mahmud, deputy leader of the opposition, argue these entities might not be effective in combating bad loans.
Others, including Mohammad Muslim Chowdhury, the comptroller and auditor general, propose placing offshore banking under stricter scrutiny.
The dialogue underscores the urgent need for a multi-pronged approach. Bangladesh must strengthen its banking governance, ensure independent regulatory oversight, and dismantle the oligarchic control over the sector. Only then can the nation rebuild trust in its financial institutions and pave the way for robust economic growth.