The banking sector in Bangladesh is facing a perfect storm of political unrest, escalating bad loans, and concerns over governance.
Protests have erupted across multiple banks following the ousting of the Sheikh Hasina government on August 5, highlighting deep-seated issues within the financial industry.
The central bank itself has not been spared, with demonstrations targeting deputy governors appointed during the previous administration.
Major commercial banks, including Sonali Bank and Islami Bank, have also been embroiled in protests, while several private banks have experienced similar unrest.
A violent clash at Islami Bank underscored the escalating tensions within the sector.
Industry insiders warn that the situation is far from contained, with other banks linked to the former government potentially facing similar protests.
This comes at a time when the banking sector is already grappling with a burgeoning bad loan crisis, which reached a record high of Tk 182,295 crore in March 2023.
Experts point to political interference as a key factor contributing to the rise in default loans.
The lack of good governance and weak oversight by the central bank has exacerbated the problem. Calls for a commission to analyze the situation at struggling banks and recommend solutions have grown louder.
There is a growing consensus that politically connected individuals should be removed from bank boards to restore confidence and improve governance.
Experts also suggest appointing independent directors and implementing stricter criteria for board membership to prevent future conflicts of interest.
As the situation unfolds, concerns over depositor and investor confidence are mounting.
The central bank is urged 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 industry.
