The Financial Express

Govt ‘interference’ responsible for ballooning bad loans: Muhith

Bankers’ poor compliance with KYC blamed for lending fiasco

| Updated: February 05, 2018 10:24:03

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Muhith sees lots of weaknesses in banking sector

Finance Minister AMA Muhith has said that there remain a lot of weaknesses in the country’s banking sector.

He had soul-searching over the persisting problems in the sector on Saturday when he attributed the country’s ballooning bad bank loans to government’s ‘interference.’

According to him, the government’s increased ‘interference’ is responsible for the current size of bad loans the state-owned banks (SoBs) are burdened with.

The minister particularly cited the state of affairs at Sonali Bank Limited (SBL) that shoulders a large sum of classified loans, as the SBL came under the scanner at its annual meeting.

He said, “Mainly, we are responsible for the existing higher rate of classified loans in Sonali Bank.”

Besides, he noted, poor compliance with the KYC (know your client) procedure by the state-owned bank is also partly responsible for the situation.

He went on to elaborate the interference syndrome, “We are responsible, because we have six banks (SoBs) and we interfere in their activities, and Sonali gets interfered with the most because it’s the largest.”

However, he said the government will not interfere in the SoBs’ state of affairs anymore.

“We are trying to reduce the interference; we (the government) have taken a decision so far that if you take a proposal with serious scrutiny and make the decision final, we will not interfere therein.” 

Mr Muhith said came up with the remarks while addressing the Annual Meeting 2018 of SBL at the auditorium of Institute of Diploma Engineers, Bangladesh in Dhaka.

He, however, urged the bank management to increase deposit-loan ratio, saying “Your deposit-loan ratio is very harmful to you. It is unbelievable that your deposit-loan ratio is only 38 per cent.”

The minister reminded the bankers of their key jobs, which he says, are doing KYC (know your client) and to scrutinise project proposals carefully.

If these two procedures are done carefully, the loans are good, he said.

Mr Muhith also said he is not happy at all with the situation in the country’s banking sector.  “There are a lot of weaknesses.”

He, however, felt exulted at the difference while comparing the situation now with that in the 1970s—after the independence of Bangladesh.     

“But if I compare the weaknesses of banking sector from 72 to 76, I would say this is the golden age of banking sector,” he said.

State Minister for Finance and Planning MA Mannan, Bank and Financial Institutions Division Secretary Md Eunusur Rahman, Bangladesh Bank Governor Fazle Kabir, SBL Chairman Md Ashraful Moqbul also spoke at the programme.

Sonali Bank CEO and Managing Director Md. Obayed Ullah Al Masud gave the address of welcome.

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