The banking sector is ailing. This is no news. But what is a matter to worry about is that the authorities concerned do not seem interested to take remedial measures. This may cause people to feel nervous about the future of the sector.
Newspapers have been publishing reports and articles one after another on scams and other financial irregularities in banks. Economists and others concerned have already sounded the alarm bell.
What is the moot worrying factor in the banking industry? It is the bulging amount of non-performing loans (NPLs). The size of such loans, according to many, has gone beyond manageable level.
Banks do different types of business. But taking deposits and lending the same to others remain their core business. This is the area where the Bangladeshi banks are now stuck up.
Deposit mobilisation is not a problem for them. Banks have been faltering in lending. They, deliberately or otherwise, have chosen a few big bad borrowers who are defaulting on repayment. Yet the banks, particularly the state-owned ones, are lenient towards the errant borrowers. They grant rescheduling facilities to such borrowers beyond the lawful limit.
Majority banks are encountering the default-problem. But the degree of sufferings varies. The state-owned banks as a group are the worst sufferers. But these banks can hardly blame anyone other than themselves and their sole owner --the government. The public sector banks and their owner know what they have been doing and also the consequences.
The central bank statistics, published at regular intervals, does reveal the state of financial health of each and every bank. The situation with soured loans belonging to the state-owned banks has been pretty bad. No amount of concern and criticism, however, could bring about any noticeable change in the situation. Rather it has deteriorated further.
Experts time and again have noted with concern the absence of corporate culture and good governance practices in the country's financial sector. However, no improvement has yet been noticed.
Experts at a dialogue, organised by the Centre for Policy Dialogue (CPD) last Saturday, diagnosed 'political patronage' as the very basic cause of all illness of the banking industry.
Political interference, which gained strength in recent years, has given rise to mismanagement, inefficiency, default culture, bad governance, weak regulatory performance, proliferation of banks etc.
It is because of political patronage, the ownership of banks, insurance companies and non-banking financial institutions has changed hands overnight. Even the sector insiders were not aware of the changes.
Delinquent defaulters targeted state-owned banks to take loans with the help of their strong links with the powers that be. The management of these banks has always been very cooperative towards these clients, if not towards the general clients. In the event of default they were granted rescheduling facilities repeatedly. When this particular facility got exhausted, some defaulters borrowed the Indian scheme of 'loan restructuring' and lobbied hard with the policymakers and the central bank honchos and eventually succeeded in introducing it in 2015.
A number of big borrowers got a lease of life. But as expected, the beneficiaries of the scheme again defaulted. That should have been the end of their journey with the banks concerned moving to takeover whatever assets the delinquent borrowers had. But nothing of that sort has happened. The delinquent clients in question are very much in business with patronage from powerful quarters and the central bank.
Political patronage has not only helped takeover of banks using unheard-of methods but also has encouraged some people to establish new banks one after another. Though policymakers claim to have favoured the establishment of new banks for the sake of 'greater financial inclusion', no feasibility study has been carried out to this effect until now.
The incumbent finance minister has made contradictory statements on the need of new banks in the country in the face of widespread criticism about granting permission to open new banks. Critics have also raised questions about the quality of sponsors, particularly of the fourth generation banks.
The questions that are now agitating minds of many: will the situation in the banking sector continue like this? Will the political patronage continue to spoil order and discipline in it? Will the Bangladesh Bank give indulgence to all the irregularities?
Banking industry being at the heart of the economy should not get such a raw deal from the politicians. The political parties will soon be unveiling their respective manifestos ahead of the upcoming national polls. They should make it clear how they want to deal with problems that bedevil the banking industry.
