THE government seems to have been striving to do a right work in a wrong way. The Financial Institutions Division has been giving more than a dozen targets to all state-owned specialised and commercial banks under the annual performance agreements since the 2016 financial year, when the system was introduced. But the process has yet to bring about any positive changes in the case of the scam-riddled commercial banks such as Sonali, Janata, BASIC and Rupali. Economists and experts put down this failure onto the absence of the required oversight that could make the method work. The amount of defaulted loans in BASIC Bank, which once made profits, as the annual publication of the Financial Institutions Division that was released in June says, has reached Tk 83.80 billion until March from Tk 75.98 billion in December 2017. The amount of defaulted loans in Sonali Bank, which has failed to recover a single penny of Tk 35 billion extended in loans to the Hallmark Group in 2013, has reached Tk 110 billion until March from Tk 109.11 billion in January. The amount of defaulted loans in Janata Bank, which is mired in a loan scam of Tk 50 billion, has reached Tk 74.41 billion from Tk 58.19 billion in December 2017.
The amount of defaulted loans in state-owned banks in all reached Tk 550.95 billion in January which was Tk 413.99 in March 2017, as the finance minister said in the parliament early April. Many instances of loans extended on political considerations, especially during the current and the immediate past tenure of the Awami League-led government, has added to the volume of defaulted loans. In view of the situation, the banks have been given 15 targets, which include recovering defaulted loans, turning loss-making branches profitable, making higher profits and increasing savings. Only this time, for the 2019 financial year, the targets were given without holding a formal ceremony. Yet, experts find no major improvement in the overall performances of the state-owned commercial banks despite the targets, for which the absence of effective monitoring of the agreements is largely blamed. While this has left the government struggling to make banks behave, this has also eroded people’s confidence in the banking system, squeezed the income of the banks, pushed up interest rate and led to aggressive lending to undeserving borrowers. A banking commission, many experts believe, could be of much help in such a situation, but the government in June, worryingly, made a turn-around from its earlier position on the institution of a banking commission, which had been in discussion for the second quarter of the year.
An independent banking commission is required to emerge from the financial crisis, a manifestation of a deep-rooted set of problems that keeps plaguing the banking sector, because an effective banking system is essential to the working of a modern economy. It is time that the government put in place the required oversight of the progress in the tasks and had punishment mechanism in cases of failure to make the process work.
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