The country’s banking sector passed yet another turbulent year marred by growing bad loans and unstoppable scams caused by hostile takeover of private banks and exposure of two new private banks to almost bankruptcy.
The swelling bad loans have been described by experts as chronic problem while they identified this takeover of banks as ‘hijack’ and a new addition to the scam-prone banking sector in the absence of proper monitoring.
The experts said the enormity of taking over private banks by a certain group surpassed all other anomalies including bankruptcy faced by Famers Banks Limited and the delayed interrogation of controversial board of directors including Sheikh Abdul Hye Bacchu by Anti-Corruption Commission as regards the much-talked-about BASIC Bank loan scams identified in 2014.
Expressing his concern over such takeover of private banks, former Bangladesh Bank governor Salehuddin Ahmed told New Age that these ‘nasty events’ could be staged only with political backings.
‘It is a bad omen for the banking sector as well as the economy,’ he noted.
The outgoing year began on wrong foot as Islami Bank Bangladesh Limited was the first victim of takeover on January 5, many years after late stalwart of ruling Awami League Akhtaruzzaman Chowdhury Babu was alleged to have forcibly taken control of United Commercial Bank Limited in 1999.
Former bureaucrat Arastoo Khan who became chairman of the IBBL was inducted into the bank as a director representing little-known Armada Spinning Mills owned by Chittagong-based S Alam Group.
Bagging big contracts like power plants with government blessings for the last few years, S Alam Group tightened grip on Social Islami Bank Limited by purchasing about 50 percent stake in the Shariah-based bank through 19 companies in October.
‘These are not hostile takeover but hijacking,’ said PricewaterhouseCoopers Bangladesh Private Limited managing partner Mamun Rashid.
He said Bangladesh Bank, Securities Exchange Commission and National Board of Revenue should not overlook the source of huge fund the group acquired to purchase the share in the banks.
On November 27, finance minister AMA Muhith said S Alam was borrowing from bank huge amounts to take over banks and the government was looking into the matter.
Bankers appreciated the moves stated by Muhith but expressed fear that the hostile takeover of private banks might happen again in absence of proper law and a dysfunctional Competition Commission.
Bangladesh Institute of Bank Management director general Toufic Ahmad Choudhury said the Competition Commission was established in 2016 but could not yet start operation.
He also said that failure by the government to punish the perpetuators encouraged scams like embezzlement of fund from state-owned Sonali Bank by Hallmark Group, loan scandal in another state-owned Janata Bank by Bimsmillah Group, shady loan of BASIC Bank and loans scams in Famers Bank Limited and NRB Commercial Bank.
Besides, impunity enjoyed by willful defaulters has pushed up the defaulted loans in the outgoing year, he stated.
Non-performing loans in the country banking sector surged to over Tk 80,000 crore for the first time at the end of September from Tk 65,731 crore a year back with a 22.15 per cent hike.
The amount of non-performing loans crossed double digit mark to 10.67 per cent of the total outstanding loans, a sign of weakness of the banking sector.
Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh, said that rise in non-performing loans would slowdown deposit growth and reduce the banks’ lending capability.
Experts said that the next year would be crucial for the banking sector as the government moved to award banking licences to three entrepreneurs despite protest from different quarters after nine banking licences were awarded in 2012-13.
They warned that proving banking licences to inexperienced and dishonest entrepreneurs could result in repetition of loan scams and liquidity crisis faced Farmers Bank and its failure to pay back the depositors’ fund.
They also warned that passage of a proposed bill now in parliament on the Bank Company Act aimed at increasing four members of family as directors of a bank from two and allowing them to stay for nine consecutive years from the current six years would create scopes for the families to plunder the banks.
The bill would also allow the influential people to retain directorship.
The outgoing year was, said experts, also disappointing as far as the recovery of the country’s $81 million reserve fund stolen by suspected hackers and launders mostly in casinos in Philippines in February 2015 was involved.
BB could not recover a single penny of the stolen fund in 2017 after Philippines sent back $15 million on mutual understanding in November 2016.
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