Stating that the entire banking sector is hostage to some influential individuals and institutions, distinguished fellow of the Centre for Policy Dialogue, Dr. Debapriya Bhattacharya yesterday welcomed the government's move towards the formation of an interim commission to look into banks.
"The entire banking sector is now being controlled by some influential individuals and institutions. Citizens are feeling helpless and panicked as they see a dangerous fragile situation in the banking sector," Dr. Debapriya said, adding that, 'Only an independent commission can take care of the sector for the greater benefit of the country's economy."
"This is not only due to bad loans. The reasons include capital shortfall at every bank, declining savings, squeezing net profit and unrealistic rate of interest for deposit and investment," he added.
Debapriya said clear violation of rules and regulations issued by Bangladesh bank, which led to frequent interference of the Anti Corruption Commission, have also contributed to gradual deterioration of the financial health of banks."In this circumstance, the government has taken a timely initiative to form the bank commission," he said.
On Wednesday last, Finance Minister AHM Mustafa Kamal told reporters at the secretariat that his government is going to form a bank commission. "We will form the bank commission through discussions with stakeholders. Someone who can discharge the duty dedicatedly and work for the sake of the country will be put in charge of the commission," Kamal told journalists, following a meeting of the ministerial committee on government purchases.
Massive irregularities led to a series of loan scams at different state-owned and private banks which resulted in numerous Non-Performing Loans (NPL) worth Tk 1162.88 billion at end of 2019, according to Bangladesh Bank data. Various bailout schemes and undue facilities extended for loan defaulters by the central bank have also been criticized by the citizens of the country, he noted.
Debapriya said that the foremost duty of the commission will be to identify the current state of the banking sector, finding irregularities and proposing fruitful, sustainable, and realistic recommendations to the government for the wellbeing of the sector.
He said it is also essential to be clear under the terms of reference whether the commission will limit within the banking sector or it will cover non-bank financial institutions and the capital market."The central bank's role is also needed to be reviewed," he added.
Dr. Fahmida Khatun, Executive Director of the CPD, said transparency of the commission about its activity is important. She said the growth of trade and commerce and industrial expansion direly needs a stable banking sector and the commission must ensure it.
She said the CPD had first spoken about the formation of a bank commission immediately after the discovery of Hallmark loan scam at Sonali bank eight years ago. "Besides, many several occasions afterward, we had placed our demands for forming a commission to address the banking sector's problems by identifying problems and recommending proper remedies to the policymakers," she said. Debapriya said the CPD has a long background in assisting government policymakers in reforming the financial sector since the early 80s.
In 1984, CPD chairman Professor Rehman Sobhan represented in the first Money Banking and Credit Commission. In 2002, I myself was a member of the bank reform committee, Debapriya said. Among others, CPD Distinguished Fellow Professor Mustafizur Rahman, Research Director Dr. Khondaker Golam Moazzem and Senior Research Fellow Towfiqul Islam Khan were present.
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