The banking sector, a key component of the financial system responsible for mobilising resources for productive investment, has been increasingly fragile over the past decade and a half, plagued by high loan default rates and subpar performance.
According to the Centre for Policy Dialogue (CPD), a leading non-government think tank, a staggering Tk 92,261 crore was siphoned off in 24 major banking scams between years 2008 to 2023—equivalent to about 12 per cent of the national budget for FY24 or 2 per cent of the FY23 GDP.
In response, the think tank has called for the establishment of a targeted, time-bound, transparent and independent Banking Commission to address the underlying issues and restore transparency and sustainably stabilise the sector.
CPD Executive Director Fahmida Khatun on Monday presented the keynote paper co-authored by CPD Research Fellow Syed Yusuf Sadat as the centre shared this development during a press conference titled ‘Bringing Discipline in the Banking Sector; What Should be Done Immediately’ at its office in Dhanmondi area of the capital.
Simply a waste
During the conference, CPD urged the newly-formed interim government to launch an independent 'Banking Commission' to investigate and bring justice to all parties involved and regain people’s trust.
Fahmida Khatun voiced strong criticism of certain third- and fourth-generation banks that were licensed under the fallen Awami League government, stating that many of these banks are now on the brink of collapse. "These banks should be closed as they have no viability. They are being kept afloat by public tax money, which is simply a waste," she remarked.
She highlighted that the banking sector, a critical economic pillar, has been increasingly vulnerable, evidenced by rising loan defaults. She lamented that the former government failed to fulfil its commitments to safeguard the banking sector, as outlined in various policy documents and election manifestos.
CPD said Chattogram-based S Alam Group owns seven banks and the conglomerate alone took Tk 30,000 crore from Islami Bank Bangladesh Limited, which used to be among the better banks, but became feeble after the takeover. Besides, Janata Bank gave AnonTex Group Tk 10,000 crore by overstepping the lending ceiling. So, if a single client receives this huge amount, what would then the other clients receive?
CID took 79 attempts
Fahmida Khatun attributes the erosion of public’s trust in the banking sector is largely due to the continuous deterioration of the sector’s health and inadequate measures taken by the policymakers of the fallen Awami League regime.
The policy analyst warns of soaring defaulted loans, citing Tk 22,481 crore in 2009 to Tk 1,82,295 crore till March of this year as well as the 2016 heist of Bangladesh Bank’s reserve probe drags on as CID took 79 attempts. Comprehensive reforms needed, but political will key.
She explained that “sporadic measures were not successful since the nature and depth of the problem requires comprehensive due diligence and structural reforms which must be backed by political will,” she said as she warned of resistance from the vested interest groups.
CPD also recommended sanctioning loans based on the BB guidelines, strictly enforcing single borrower exposure limit, halting repeated rescheduling and write-offs of non-performing loans (NPLs), upholding BB’s autonomy, no more providing licenses for new banks of political backing, immediately freezing wilful defaulters and publicly disclosing that list.
At the briefing, CPD Distinguished Fellow Mustafizur Rahman, Research Director Khondaker Golam Moazzem and Senior Research Fellow Towfiqul Islam Khan, among others, were present.
