The Metropolitan Chamber of Commerce and Industry has observed that corruption-ridden banking sector is the biggest downside risk for the country’s economy.
To get rid of the situation, the MCCI called for strict vigilance by the central bank to bring discipline in the sector.
The chamber body made the observation and call in its review on ‘economic situation in Bangladesh’ for January-March quarter of the year 2018.
Meanwhile, the United Nations in a report published on May 7 this year also stated that the banking sector in Bangladesh had been plagued by financial scams, non-performing loans and weak monitoring problems, which might cause a macroeconomic risk in near term.
According to the Bangladesh Bank data released in March this year, the amount of defaulted loans in the banking sector increased to Tk 74,303 crore at the end of December, 2017 from Tk 62,172.32 crore a year ago.
The classified loans accounted for 9.31 per cent of the total outstanding loans at the end of 2017 while the figure was 9.23 at the end of 2016.
Farmers Bank, a new generation bank, has become a troubled bank within a few years after the commencement of its operation due to irregularities in loan disbursement supported by a number of sponsor-directors of the bank.
Before Farmers Bank, irregularities in disbursement of huge amount of loans were surfaced in Sonali Bank, Janata Bank and BASIC Bank.
Although the banks’ owners managed to bag a number of benefits from the government showing intense liquidity crisis at the banking sector, the MCCI report stated that the private sector credit growth was higher than the central bank’s target of 16.3 per cent set for the second half of the present fiscal, dispelling the notion of an ongoing liquidity crisis in the banking sector.
The report also mentioned power and gas shortage, and weak infrastructure as the major obstacles to achieving the country’s projected growth, as they would disrupt industrial production and also discouraged new investment.
Other downside risks include poor implementation of public investment programmes, growing requirement of subsidy payments by the state to different sectors, uncertain availability of foreign aid and growing income inequalities, the MCCI quarterly review said.
It said only 45.65 per cent of the ADP had reportedly been implemented in the first nine months of the present fiscal year of 2017-2018.
An annual average $6.7 billion foreign direct investment would be needed to graduate to an upper middle-income country by 2021, it said.
‘For attaining FDI in such a volume, the government needs to take steps to overcome the impediments like shortage of power and energy, lack of consistency in policy and regulatory framework, scarcity of industrial land, and political uncertainty,’ it said.
It also mentioned the country’s economic growth as the outcome of steady progress in the agriculture sector and food security, moderately good growth in industry despite the crisis in the power sector, decline in the inflation rate to single digit, macroeconomic stability, build-up of a comfortable foreign exchange reserve, achieving most of the MDG targets, and good progress in achieving the SDGs.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking