Good governance, transparency, and accountability in the banking sector have seen a drastic decline. This decline is attributed to the self-serving interests of a ruling group that has established misrule within the sector, ultimately eroding depositor confidence.
These concerns were highlighted by Fahmida Khatun, Executive Director of Centre for Policy Dialogue (CPD), at a round table discussion on contemporary banking issues held in the capital on Thursday. The discussion, was conducted by honorary fellow of the CPD Mustafizur Rahman conducted the discussion. Notable participants included former planning minister MA Mannan, former Bangladesh Bank (BB) governor Salehuddin Ahmed, former chairman of Association of Bankers Bangladesh (ABB) Nurul Amin, Member of Parliament Barrister Anisul Islam Mahmud and senior journalist Syed Ishtiaq Reza.
Fahmida Khatun pointed out that by the end of 2022, distressed debt amounted to Tk3780 billion and further considering the additional Tk1770 billion tied up in money loan court cases, the volume of bad loans is even higher now.
She emphasized that the financial sector, which relies heavily on banks, plays a crucial role in the countrys development. However, the current fragility in the sector is marked by a significant loss of good governance and accountability, with loan approval, rescheduling and foreclosures being conducted without proper oversight.
Khatun also noted that Bangladesh Bank is not operating independently due to either external pressures or internal decision-making flaws. She stressed the need for improvement in this area, stating that inaccurate information leads to flawed policies. Unlike central banks in developed countries that provide real-time information, Bangladesh Bank has closed off avenues for accurate data collection.
Former governor Salehuddin Ahmed said that controlling authorities need to enforce strict measures. However, Bangladesh Banks inconsistency is making one rule in the morning and changing it by the afternoon under external influence.
It has turned it into a cooperative society rather than a regulatory authority. Despite the legal autonomy granted to Bangladesh Bank, it is not effectively utilizing it, he said. Ahmed further highlighted that the reluctance to raise interest rates and dollar rate has increased pressure on the populace.
He said it is crucial to enhance credit to small and medium enterprises and agricultural sector. Without such measures, Bangladesh cannot hope to achieve growth comparable to Hong Kong or Singapore.
Ahmed said interest rates and dollar rate should have been increased long ago, but not doing so is putting pressure on people to do better.
Only contractionary monetary policy, increasing dollar rate or increasing interest rates or crawling peg will not lead to growth, he added.
