‘Ghar ki murgi daal barabar’ is an old Urdu saying, which means own possessions often are of little value to their owner/s. The saying seems to be true in the case of Sonali Bank, the country’s largest state-owned bank.
The government, as the owner of the bank, forces it to carry out various transactions and provide services at no cost or against nominal fees/charges. Such an approach has been taking a heavy toll on the financial health of the bank for a long period.
The Sonali Bank reportedly makes available 37 types of services to people at no cost. It takes fees at nominal rates for 14 other services.
The bank, which also offers treasury services in many districts, has been requesting the Ministry of Finance since 2019 to pay fees for the service it has been offering free of cost.
Being asked by the Financial Institutions Division (FID), the SB has recently done a partial estimate of the loss it has incurred on account of services it offers free of cost or at nominal charges/fees. The cumulative loss of the bank on account of free or near-free services during the past 13 years stood at Tk182 billion. In 2021, alone the loss was worth Tk 26.7 billion.
The bank has to employ sizeable manpower and logistics to carry out all these services, involving a substantial cost. Yet it fetches a little or no return. The bank cannot stop offering these services, for its owner wants it to offer the services.
A large part of the loss that the bank incurs has been on account of letters of credit (LCs) and bonds, issued in favour of the government and various other state-owned entities.
The rates of commission or interest that the bank has been realising are far lower than the prevailing market rates.
A case in point is the amount received as a commission by the bank against the LC it had opened for the Roopur Nuclear Power Plant project. The LC in question was worth Tk 942.46 billion. It was supposed to earn a commission of Tk 52.57 billion at the usual rate. But it earned a paltry amount of Tk 200 million.
The bank is also deprived of due earnings from the long-term bonds it has to issue in favour of state-owned organisations. The rates of interest on these bonds are fixed well below that of bonds issued by the government. The financial sector behemoth is also made to pay interest to the owners of the government savings certificate. And the amount is hardly reimbursed.
The SB has been incurring losses in recent years, for a variety of reasons. But had the bank received a justified amount of money either from the government or beneficiaries for the services it provides free of cost or against nominal fees, the story could have been different.
The Ministry of Finance has been telling the bank to improve its financial performance while depriving it of due revenue earnings against the services it offers to different clients under government instruction.
The bank disburses old-age allowance, widow allowance, disability allowance, salaries and wages of teachers and employees, pensions of government servants, members of armed forces, etc. The bank does these jobs on behalf of the government. So, the government should compensate for its services.
There has been substantial erosion in the capital of the bank. On occasions, the government replenishes capital. But the volume of funds made available to the bank for the purpose is well below the requirement. The amount is too small, if compared to the money the bank loses on account of services it offers either free-of-cost or against nominal charges.
