Monetary policies fail to achieve objectives

News Desk :
The monetary policies devised by the Bangladesh Bank (BB) period after period failed to infuse dynamism in the country’s economy as a non-stop deterioration of the banking sector performances amid high growth of bad loans rendered the policies largely ineffective.
Economists said that non-performing loans had been growing over the years though it has already been identified as the major problem for the monetary policy that is aimed at generating jobs, checking inflation and maintaining stability in the financial sector.
They also said that private sector credit growth targets stipulated in the monetary statement were far from achieved while the capital market development was limited against expectations.
BB monetary policy statements have been highlighting the adverse impacts of the soaring bad loans but that could hardly check the NPL volume that surged to Tk 1,34,396 crore at the end of September 2022 from Tk 89,340 crore in June 2018 and Tk 22,710 in 2010.
In the latest monetary policy for the January-June 2023 period, the BB said that the high NPL ratio and the issue of governance in banks and non-bank financial institutions were also matters of concern for financial stability of the economy.
In accordance with former BB governor Salehuddin Ahmed, expressing concern by the central bank over the growing NPL and lack of good governance in the banking sector is not enough to address the problems.
‘The Bangladesh Bank should come up with specific targets on arresting and cutting the NPL volume and on defaulted loans and loan write-off,’ observed Salehuddin Ahmed.
Otherwise, the monetary policy statements will remain less than effective, he added.
Economists said that the high growth of NPL undermined the financial condition of banks on which the BB heavily relied in order to maintain money flow to different sectors of the economy.
The Bangladesh Bank has to be more proactive in checking irregularities in the extension of loans that eventually turn into bad loans, he said, while indicating the highly sorry state of many banks due to series of loan scams in the banking sector in the past one decade.
From the Hallmark loan scam in Sonali Bank to the fictitious loans approved by BASIC Bank’s board of directors with Sheikh Abdul Hye Bachchu in the chair and the loan scam in Janata Bank staged by the
little-known Anon Tex remain unaddressed.
Moreover, lifting a staggering volume of more than Tk 30,000 crore recently by Chattogram-based S Alam Group from Islamic Bank Bangladesh Limited in violation of the banking rules indicates that the NPL size will grow further in the days to come.
The central bank has been failing to fulfil its targets to disburse credit to the private sector, the main driving force of the country’s economy, because banks cannot perform their responsibilities.
The central bank in its latest monetary statement said that the private sector credit growth increased by 12.76 per cent in the first half of FY23 in comparison with the same period of the previous year, though the target was 14.1 per cent.
Former World Bank Dhaka office chief economist Zahid Hussain noted that private sector investment not only depended on BB targets but also on other issues, including favourable investment climate and access to credit for entrepreneurs.
This was reflected in the index released on January 27, 2023 jointly by the Metropolitan Chamber of Commerce and Industry, Dhaka and the Policy Exchange, Bangladesh.
The country scored 61.95 on a 0-100 scale in the 2022 index. The score was 61.01 in 2021.