Money at high risk politically sanctioned banks

IN the face of pressure from the high-ups of the incumbent government at its earlier tenure, the central bank permitted the operation of nine new banks despite severe opposition from the experts. And now the ultimate result has happened as is evident from the situation that the newly approved banks are now facing. They are now victims of political interruption. A report published in this newspaper on Wednesday said that these new banks have fallen short of good governance since their inception. The management of the banks are not being able to work independently as the banks were given permission on political considerations. A central bank investigation revealed that the board of directors are interfering into the banks’ routine daily businesses.
Irregularities and nepotism are dominating the recruitment of the officers and employees. It appears as if irregularities have become a regular phenomenon of the newly established banks. Uncalled for interference is the order there – be that in management portfolio or in financial administration. Loan disbursement, deposit collection, car purchase, recruitment and corporate social responsibility, whatever the banking service windows– are facing crude mismanagement. Naïveté and interference of the directors have made the situation more chaotic. It has become a matter of fear and frustration to the depositors of those last generation banks.
We expressed our concern at the start of operations of these banks, as the decision was certainly an imprudent one taking into account only the interests of political will. Consequently, the mismanagement in the new banks is not only posing threats to themselves but the whole banking sector may become unstable. At the top, the depositors’ money is at high risk. Inefficiency, lack of skilled manpower dominate the show while nepotism, whims and favoritism rule the domain in these banks.
The central bank chief also suspects that the newly established banks are deficient in both economic and good governance indexes. BB investigations suggested actions against the chief executives of the banks, if necessary. Chairmen of the boards of directors as well as the chief executives of the new banks were earlier warned for their improper governance in running the bank management as well as the banking activities. BB asked the board of directors not to interfere anymore into the banks’ regular activities and not to pressurize the managing directors concerned. The BB Governor asked for good governance instead of aggressive banking and recorded his apprehension that if it continues the banks will not survive.
Thus, the central bank’s recent attempt is apparently admirable; but it has not altogether sealed the loopholes through which the anomalies have happened and are still happening in the new banks. We fear that such loopholes are enough to allow exploiters such as politically influential persons in powerful places in the government and powerful lobbies to fulfil their targets. We would suggest that the central bank take stern actions to protect the depositors’ interest, which is at high risk in the newly permitted banks without bowing to pressure from vested quarters.