Recapitalisation will encourage more scams in govt banks

THE government’s move to recapitalise public banks will bring nothing but create a new burden on the national exchequer and thus also on the citizens. Experts said unless a sound management is ensured in the state-owned banks, any bid to inject capital will be useless. The financial health of the state-owned banks has deteriorated alarmingly in the recent years due to poor governance associated with large-scale loan scams, poor loan recovery, rising bad loans and loan disbursement under political consideration.
The New Nation on Friday reported that the government had already approved a proposal to inject Tk 1,500 crore in scam-mired Sonali Bank and BASIC Bank. The government said their intention behind the injection of capital is to help lending activity of the banks and to meet the capital adequacy norms, although, the loopholes of banks are not shut. Fresh capital will also be provided to three other problem-hit public commercial banks — Janata, Agrani and Rupali to meet their large-scale capital shortfall, the report said.
A former governor of Bangladesh Bank suggested that without infusing dynamism in governance system, no recapitalisation plan will be successful in the public banks. The capital infusion scheme is a ‘perverse incentive’ for the public banks as the proposed capital injection plan is unjustified when the banks’ management is engaged in robbing funds, like BASIC Bank. Recapitalization will be fruitful if the perpetrators of the BASIC Bank and Sonali-Hall Mark loan scam could be punished and the bank robbery by management is strictly restricted. Unless the above occur, the move will not bear any fruit and cannot protect drainage of funds from the banks.
The taxpayers did not give mandate to the government to launder their hard-earned money through the unscrupulous people. The capital infusion scheme will just help bank officials to drain public money. While the government is pumping out public money, surprisingly it is also putting pressure on the masses to pay tax and is set to raise tariffs of electricity and gas prices.
The government in the last year also provided funds to the four state owned banks — Sonali, Janata, Agrani and Rupali received Tk 4,100 crore from the budget, of which Sonali Bank alone got Tk 1,995 crore. But these capital buffer steps finally did not work only due to corruption by the banks’ management. While the private commercial banks are refusing deposits due to an over abundance, public banks are facing capital shortfall due to a decrease of people’s confidence which originated from corruption, management ineptness and loan scams.
We feel the government must restore a sound management with deployment of honest and professional people in the public banks prior to providing fresh funds. Lending practices under political pressure should also be stopped to protect drainage of the banks fund. Only a strong political will to keep the banks free from political control can save the public banks from deterioration.