(Editor’s Note: Well known economists, including two former finance ministers, have recently warned the government against allowing any new commercial bank in the private sector. They argued that instead it should try to keep the banking sector under strict watch as a large number of banks were grossly mismanaged, and if necessary, merge some of these banks with the stronger ones. But it is clear now that the government on political consideration has again decided to allow two more banks disregarding the dismal track records of some of the banks allowed on political consideration. Any government ought to be more careful in taking such decision as the banks deal with the peoples’ money and it can’t shirk its responsibility.)
Shakhawat Hossain/New Age
The Prime Ministers’ Office has given consent to the establishment of two more banks by private entrepreneurs amid warning by the experts that entry of new banks would be disastrous for the already scam-hit and overcrowded banking sector.
The consent came in the past week following a proposal made by Financial Institutions Division to award licences for establishing the proposed Bengal Bank and People’s Bank, division officials said.
They said that consents to the establishment of Bengal Bank by Bengal Group of Industries and People’s Bank by MA Quasem of Swandip, backed by Awami League leaders, had already been forwarded to the Bangladesh Bank which was likely to review the proposals in the next board meeting.
The central is also likely to consider the proposal for the establishment of another bank owned by the police, the officials said.
Financial Institutions Division secretary Eunusur Rahman, also a member of the central bank board of directors, however, told New Age on Monday that he was not sure whether the proposals would be reviewed in the next board meeting.
The agenda and the date of the next board of directors’ meeting were yet to be fixed, he said.
On November 27, finance minister AMA Muhith said that the government was going to give licences for setting up three more new banks.
He, however, did not name the banks.
Despite severe criticism, the incumbent government in 2012-13 awarded licences for the establishment of nine banks reportedly on political consideration.
Two of them — NRB Commercial Bank and Farmers Bank — are already identified as risky by the parliamentary standing committee on finance at a meeting on October 29 because of scams and growing non-performing loans.
Other new banks — Meghna Bank, Midland Bank, Modhumoti Bank, NRB Bank, NRB Global Bank, South Bangla Agriculture and Commerce Bank and Union Bank — are also struggling because of their inexperience in the banking business, experts said.
Bad loans given by the nine fourth-generation banks increased by 86.18 per cent to Tk 509.10 crore in the first quarter of 2017-18.
Economic Research Group research director Sajjad Zohir said the overall banking sector was passing through a crisis due to scams in both private and public banks.
He said that the crisis was getting acute because of awarding new banking licences to inexperienced groups.
He compared the situation with drivers on the highway without proper driving knowledge.
Transparency International Bangladesh executive director Iftekharuzzaman said that the establishment of new banks to embezzle depositors fund became a ‘fashion’ nowadays.
The loan scams in the new banks in addition to growing defaulted loans of over Tk 80,000 crore in the banking sector would discourage depositors to save money in the banks, he said.
Bengal Group of Industries vice-chairman Jashim Uddin, however, said that all of the 57 banks were not bad and some of them were doing good business with the expansion of the country’s economy.
He said that they would run their proposed bank with professionals so that it could flourish like other companies of the group.
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