Bangladesh’s banking sector is facing a perfect storm of political unrest, escalating bad loans, and concerns over governance.
Protests have erupted across multiple banks as Sheikh Hasina resigned and fled the country on August 5, highlighting deep-seated issues within the financial sector.
In fact, the banking sector has been in a difficult situation for a long time, primarily due to an ever increasing volume of classified loans.
By the end of March this year, the total loan disbursed from all banks stood at over Tk 16 trillion.
Of them, 11.10 percent constituted non-performing loans. The amount so far defaulted was the highest in the country’s history.
Experts and businesspeople have urged the newly formed interim government to adopt urgent measures to ensure good governance in the banking sector, saying that the crisis in financial institutions is much deeper than anyone could imagine.
They point to political interference as a key factor contributing to the rise in default loans.
The lack of good governance and the weak oversight by the central bank have exacerbated the problem.
They demanded punishment for those involved in financial crimes in banks and financial institutions.
Selim RF Hussain, chairman of the Association of Bankers, Bangladesh at a dialogue in Dhaka on Wednesday said the banking sector has become fragile over the past 15 years during the rule of Sheikh Hasina-led government.
It was demanded that accounts belonging to directors of scam-hit banks should be frozen and they should not be allowed to leave the country.
Besides, there are major mismatches in the data based on which economic indicators were calculated. So, a white paper should be formulated on the actual economic scenario.
To boost the economy, initiatives must be taken to solve the problems plaguing the power and energy sector.
The deterioration of foreign exchange reserves, the declining trend of imports, and the massive devaluation of the taka must also be addressed.
As the situation unfurls, concerns over depositor and investor confidence are mounting.
The central bank has to take swift action to protect bank funds and prevent further erosion of trust in the financial system.
While the immediate focus is on addressing the unrest and stabilizing the banking sector, the underlying issues of governance, transparency, and accountability must be tackled to ensure the long-term health of the financial institutions.
