New problems are weighing on our banking and financial sector soon after the fall of the Awami League government on August 5, adding to its manifold woes it has been suffering for the last 15 years. This on-going agitation, if not nip in the bud, will surely have an immediate impact on the whole economy.
This is why the interim government needs to swing into actions right now to overhaul the entire banking system to protect this key economic sector from further worsening.
The new crisis brewing in the banking sector is the unrest in the central bank and in some other government and private commercial banks over at a time when our banking sector is a whisker away from collapse with several banks burdened with huge default loans and suffering from low liqudity.
First of all, Bangladesh Bank within a few days after the ouster of Sheikh Hasina's government witnessed its governor and some other deputy governors quit in the wake of protests inside the bank, blaming them that they were appointed contractually on political grounds.
Demonstrations have marred normal operations of several commercial banks like Sonali Bank, United Commercial Bank, Social Islami Bank, IFIC Bank and Islami Bank of Bangladesh where protests between two rival groups of employees and officers turned into violence as several bankers suffered bullet injuries.
Amid on-going uneasy situation, the Centre for Policy Dialogue, an independent think-tank, came up on Monday with a suggestion for the establishment of a short-term Banking Commission as a quick and prompt remedy to solve the banking sector's crises with the closure of the Financial Institutions Department of the Finance Ministry to get rid of dual administrative system in this sector.
CPD also gave a warning about some dying and already clinically dead banks which need to be allowed to die naturally as they have little ability to get back on their feet. Unfortunately, these banks did not meet their end because of bailouts by the previous government.
What is more worrying is that over Tk 92 thousand crore was funneled out from these banks over the past 15 years that accounts for 12 per cent of the national budget for FY24. These funds were embezzled in at least 24 major banking scams between 2008 and 2023.
As a result, bad loans in the banking sector reached an all-time high of Tk 182,295 crore as of March this year, representing 11.10 percent of the total outstanding loans.
All these irregularities and mismanagement indicate that our banking sector is now in dire straits and may collapse at any time. So, it is high time the interim government took prompt steps to save our banking sector without any delay.
