Restoring discipline in financial sector  

The prime minister is learnt to have issued an instruction during a recently held Secretaries' Committee Meeting to the effect that she be informed of the real situation in the country's banking sector. Evidently, she was concerned about some recent questionable developments in the banking sector. In this connection, mention may be made here of the report that a huge amount of loan (over Tk68 billion) has been withdrawn from a private sector bank, Islami Bank Bangladesh Limited (IBBL), allegedly by some business entities that fell short of proper address or documents. The incident raised a few eyebrows. But the bank in question has contested the report and maintained that the amount was given as loan following standard procedure. One would like to believe that it has been so. However, the central bank, the Bangladesh Bank (BB), has reportedly informed that it would 'monitor and supervise' the matter.

Notably, default loan culture, scams and irregularities have long been dogging the country's banking sector. Meanwhile, in a recent report it has been revealed that the total defaulted loans in the country's banks have soared to more than TK 310 billion. All this has been happening at a time when the economy is going through a serious crisis arising from high inflation and dwindling foreign exchange reserve. Small wonder that against this backdrop even the High Court, during a hearing on Sunday (November 27), questioned why the Anti-Corruption Commission (ACC) was not holding big loan defaulters to account while it (ACC) was only going after the small loan defaulters. Interestingly, the court hearing in question was related to a case involving loan defaulting.

The prime minister's directive and the High Court's observation only point to the gravity of the predicament the country's banking or for that matter the country's entire financial sector is in. But such instances of gross irregularity and mismanagement are also nothing new in the financial sector. One may recall at this point how a little known company using forged documents swindled a private sector bank, Bangladesh Commerce Bank Limited (BCBL), out of Tk 2.0 billion in 2018. It was later discovered that the fraudulent company actually laundered the money in the name of export. Strangely enough, the said bank did show the laundered money as a loan extended to the fraudulent company. What the bank next did was more surprising as it rescheduled the loan (obviously defaulting) in favour of that fake company. Of course, it was done without informing the central bank. Most surprising of all was that the central bank later allowed the private bank in question to reschedule the 'defaulted loan' in violation of rules set by the financial regulatory body itself. According to the BB rules, no bank can regularise a bad loan that has been obtained through forgery. On top of all these previous incidents of gross irregularities in the banking sector, the latest developments have proved to be the straw that finally broke the proverbial camel's back.

Oddly though, all these unsettling reports are coming from the country's financial sector when the government is seeking support from the multilateral donor agencies including the International Monetary Fund (IMF) to keep the economy afloat in the midst of a high inflationary pressure, forex reserve crisis and huge trade deficits. So, the nation expects that the central bank would take serious note of these upsetting developments and devise deterrent measures against corruption or infringement of rules in the financial sector.