–M A Masum–

In the last 15 years, lacs of crores taka have been looted from different banks with direct help of central bank. Despite many efforts of the interim government, complete trust of customers in bank has not been restored. Many customers are not able to withdraw their money from bank. On the other hand, private sector entrepreneurs are unable to take loans from banks due to acute liquidity crisis.

As a result, the continuation of regular business activities has come to a standstill. Many branch managers and officers are under tremendous pressure as they are not able to pay money as per demand of customers. Many officials have been mental tortured. Tears of some bank managers for failing to pay customers are floating in social media. As a result, many honest and loyal bankers are undergoing severe mental harassment on a personal, family and social level.

After former bureaucrats Fazle Kabir and Abdur Rouf Talukder took over as governors, condition of banking sector has become increasingly fragile. The way banks were looted and robbed without respite from 2009 to 2024 got flashed through news headlines several times during past years. Several newspapers had to go through immense trials and tribulations for publishing reports on corruption and irregularities in the country’s banks. Due to unlimited irregularities, corruption, mismanagement and abuse of power by these two former governors with high-level officials of Bangladesh Bank, entire banking sector has gone into hands of international mafia gangs.

The most alarming indicator of the banking sector’s weakness is the significant increase in non-performing loans (NPLs) in the last 15 years. In 2009, the total default loan of banks was Tk 22,480 crore, which has increased to around Tk 188,000 crore by March 2024. Distressed loans at banks totalled over Tk 4.75 lakh crore at the end of 2023 – a revelation that makes for a sobering read of the actual health of this vital sector of the economy.

Many times in the past, we have heard of bank reforms, but instead of reforms, we have seen the practice of bank robbery. Finally, after the interim government took over on September 11, the Bangladesh Bank formed a six-member taskforce with the renowned economists of the country to reform banking sector. I would like to offer some opinion/proposals on which banking sector need to be reformed urgently. (1) It is necessary to restore the true autonomy of Bangladesh Bank. It is necessary to abolish banking division of Ministry of Finance permanently, avoiding dual regulatory. As a result, Bangladesh Bank will be the sole regulator of all public and private sector banks. (2) An efficient central bank cannot be expected if honest, sincere, skilled in banking and financial sector, experienced and professional person is not a governor or deputy governor. Therefore, it is necessary to appoint governor and deputy governor in a transparent process through coordination of experts and formation of a search committee. (3) Transparency and accountability should be ensured in recruitment process of all public and private banks. Because the root of corruption are happened by bankers who are appointed through corruption and nepotism.

Once upon a time, meritorious manpower from all over the country were recruited through competitive examinations in private banks. But in recent years, corruption, nepotism, abuse of power and mismanagement have taken a multi-dimensional shape due to recruitment of unskilled employees by choosing a particular region through political influence and illegal money transactions. Many banks have recruited thousands of unqualified employees without following the minimum norms of recruitment process. Therefore, in private banks, recruitment process should be made through “Private Bankers Recruitment Committee (BBRC)” or similar management on the lines of “Bankers Recruitment Committee (BRC)” of government banks.

It may also be formed directly under the supervision of Bangladesh Bank or consist of private banks where Bangladesh Bank may represent. (4) No new bank to be approved within next 15 years. (5) Commercial banks should use a unique ID (may be NID) in the server of Bangladesh Bank of each customer, specially loan customer, under which all bank accounts of concerned customer will be operated. As a result, it will be easier to monitor transactions of customers of all banks by Bangladesh Bank (6) Ownership of multiple banks in hands of one person or group should be avoided with a strong initiative. (7) A single borrower exposure limit shall be determined taking into account individual or institution and not group. (8) Maximum loan limit of group should be specified. (9) There may be one director from same family for a maximum period of three years and maximum of two consecutive tenure.

(10) The definition of loan defaulter and willful loan defaulter should be changed and restored as before. The banks which have become weak banks through serious frauds should be given liquidity facility and other policy support for a certain period (11) Maximum punishment death sentence for money laundering should be executed. (12) All responsibilities of management and operation of CIB should be under direct control of Bangladesh Bank. (13) Inspection team of central bank should be equipped with modern technology and strengthened. (14) Measures should be taken so that director of one bank does not take illegal loans from other banks. (15) There should be a system of price verification of imported goods like dashboard under control of Bangladesh Bank. (16) Approval of certain loan limit should be Bangladesh Bank. (17) Serious weak banks should not be assisted for an unlimited period of time. At one time there should be a merger with another bank

(18) List of loan defaulters should be made public from time to time, passports should be summoned, blacklisting and depriving state of higher benefits. Defaulters have to be tried by special courts within a short period of time (19) BB LC is one of the main window of money looting. Some dishonest businessman swindled crores of taka from banking system by opening fake companies and opening fake back-to-back LCs. When scheduled bank opens local LCs or back-to-back LCs it should appoint reputed national or international inspection companies which will confirm through their certification that goods have been delivered to the LC openers according to LC terms. (20) One of the problems in banking sector is presence of mountain-proof default loans. Strict laws should be made to recover these defaulted loans and cases should be settled under the short term Tribunal Act.

(21) Amount of corruption in Islamic banks is very high along with other banks. These fraudsters and their associates should be identified and strict action should be taken against them within shortest possible time. (22) Many banks have been accused of showing low interest on loans to influential people through software manipulation or not generating interest or deleting loan statements. So all banks should have a unique software and all loan information should be stored in central bank’s server. (23) It is necessary to set standard of credit report provider institutions. (24) There should be instructions from Bangladesh Bank to recruit manpower from all region of the country.

Many irregularities in banking sector have been reported in the media, but the most influential are still out of reach. The main objective of reform program should be to identify and eliminate problems of banking sector and bring it back to a healthy trend. It is expected that the reforms will help restore discipline and good governance in the banking & financial sector and meet aspirations of common people of the country.

(The writer is a banking and financial analyst, First Assistant Vice President, Islami Bank Bangladesh PLC)