SoBs in shaky financial situation after 52 years

Syed Nasir Hossain: The country’s state-owned banks are still involved in various irregularities. These institutions of the state are being destroyed by giving anonymous loans through forgery. After 52 years of financial scandals and gross mismanagement, the state-owned banks are now in a shaky financial situation.
At the end of September this year, 21.70 percent of the loans disbursed by these banks have become defaulters. Earlier in June, defaults stood at 25 percent. Even at the end of December 2022, the default rate of these banks was 20 percent.
According to the data, at the end of September this year, the disbursed credit status of six state-owned commercial banks was Tk 3 lakh 3 thousand 179 crore. Of this, Tk 65,797 crore were in default, which is 21.70 percent of the disbursed loans.
Even at the end of December 2022, the defaulted loans of these six state-owned commercial banks were limited to Tk 56,460 crore. At that time, 20.28 percent of the disbursed loans of the banks were in default accounts. In just a span of nine months, these banks have defaulted Tk 9,337 crore.
At the end of September quarter, Janata Bank’s defaulted loans stood at Tk 17,000 crore. And Agrani Bank has defaulted loans of Tk 16,873 crores. Besides, Sonali Bank has defaulted loans of Tk 13,992 crore, Rupali Bank Tk 8,728 crore, Basic Bank Tk 8,209 crore and Bangladesh Development Bank Tk 991 crore.
Ahsan H. Mansoor, Executive Director of Research Institute Policy Research Institute (PRI) said, a bank reform committee was formed at one time. After that, the defaults of the banking sector came down a lot. Then again from 2011 the irregularities in the sector started to increase again.
There is a lack of corporate governance. So there has to be political will to solve these problems. Maybe the government will work on reforming the banking sector after the next election. Because assistance will be available from many, including the IMF and the World Bank. However, it is important to have the right intention of the government in these cases. Moreover, it is not possible to solve these problems.
The International Monetary Fund (IMF) has analyzed the situation of the banking sector in Bangladesh and said that the reform of the financial sector is necessary. In order to reduce the risk of the banking sector, the organization has urged to formulate special strategies for capital recovery as well as reducing the defaulted loans of the state-owned banks. Directors agreed that strengthening the supervisory and regulatory framework of the banking sector and improving governance would improve the efficiency of the financial sector.
Meanwhile, the IMF has asked the banking sector to reduce its non-performing loans to 10 percent by 2024. Now the non-performing loans of most of the private sector banks are less than 10 percent but in the public sector it is more than 20 percent.
Recently, Ahsan H. Mansoor said in an event that the country’s financial sector is suffering in many ways. All indicators are pointing to the downside for the financial sector. Bangladesh is currently implementing the International Monetary Fund (IMF) loan program. Three termed this program as timely.
He thinks that the country does not need money. Rather, the policy reforms that the IMF has talked about are needed. The country should reform the economy for its own sake.
The Bank Reforms Committee headed by economist Wahiduddin Mahmud gave its final report in 1999. The committee said in its report, ‘State-owned banks have been used as a tool for distribution of political privileges, which is one of the causes of loan defaults. Opposition from vested interests and influential groups is perhaps the biggest obstacle to banking sector reform. For this reason, a strong political commitment is most needed to make the reform program successful.
According to the data of Bangladesh Bank, the total disbursed loans of the country’s banking sector at the end of September quarter was Tk 15 lakh 65 thousand 195 crores. Out of this, Tk 1 lakh 55 thousand 397 crore have become defaulted loans, which is 9.93 percent of the total disbursed loans. Tk 21 thousand crores more than the same period of the previous year. At the end of September last year, the amount of defaulted loans was Tk 1 lakh 34 thousand 396 crores.
Corporate governance and defaulted loans are two major problems in the banking sector. It will not be right to make concessions to deal with this major problem in the banking sector. A change in banking culture should be brought about through planning. In order to eliminate the problem of defaulters in the banking system, the law should be applied equally in the case of receivers and donors.