2024-07-14 11:22:32
Banks are showing interest income on loans instead of collecting loans. From that, taxes are paid to the government and dividends are paid to the shareholders. On the contrary, the amount of defaulted loans is increasing. In this way, the most information is being hidden in the financial sector. On the other hand, due to this financial crisis, the country is becoming dependent on debt day by day. Moreover, the ability to get loans is gradually decreasing.
Economist and Executive Director of Policy Research Institute (PRI) said in the speech of the chief guest at the Economic Reporters Forum (ERF) in Paltan, Dhaka, on the causes of distress in the banking sector in Bangladesh. Ahsan H Mansoor says these things.
General Secretary Abul Kashem presided over the program under the chairmanship of ERF President Refayet Ullah Mirdhar. Senior ERF members Obaidullah Roni and Sanaullah Saqib presented the keynote.
He said that is where correct information is most important. Bangladesh Bank is now showing 11 percent non-performing loans. In fact, defaults or bad loans are 25 percent. It can’t go on like this for much longer. It is not possible to solve the problem of this sector by hiding bad loans, irregularities, corruption, money laundering of banks. Bangladesh Bank has to be responsible for all these. For this reason, the government should take initiatives to keep the financial sector clean.
Ahsan H. Mansoor also said that before the elections, it was said that extensive reforms will be brought in the financial sector. But even after six months, nothing has happened. It is very disappointing. Reforming the banking sector is now very important for the sake of the country. It is good that the IMF has given loans to Bangladesh. But we need reforms for our own sake. We have consumed the deposit. How long will the bank run like this? A white paper on the banking sector needs to be published. We need to find out the reason for the current situation in the banking sector.
He said that the government is not able to pay the bills of various sectors including the energy sector due to lack of sufficient dollars. If the health is not good then one cannot carry his burden. Due to the weakness of the banking sector, now the banks are unable to give loans to the private sector as well. Again the government is not able to give loans. Now the growth of bank deposits is 8 and a half to 9 percent. If it increases this year, then it can be 10 percent maximum. According to that, this year the deposit will be 1 lakh 70 thousand crores. So how will the bank give the target of the loan from the banking sector in the budget of the new financial year? If the government takes a loan of 1 lakh 37 thousand crore rupees, the private sector will not get the money.
In the original article, senior members of ERF, Obaidullah Roni and Sanaullah Saqib, said that the praise that the government has gained by building various infrastructures including the Padma Bridge is fading away due to high inflation and bank sector defaults and various financial scams. As the regulatory body of the financial sector, this responsibility falls on the central bank. If initiatives are not taken in these matters now, then big problems will be created in the banking sector.
According to the article, one of the reasons for high inflation in the country was that Bangladesh Bank had artificially kept the dollar rate at 84-86 taka for a long time. However, post-corona global demand surge and Russia-Ukraine war could no longer sustain it. The dollar rate rises to 110 rupees. On the one hand, the increase in the price of goods in the world market, at the same time, the inflation has been close to 10 percent for two consecutive years due to the effect of keeping the dollar rate artificially for a long time. Reserves have consistently decreased from 48.06 billion in August 2021 to 26 billion dollars now. However, usable reserves have come down to 15 billion. One of the reasons for the rising cost of living is the dollar crisis. However, no visible action was taken against money launderers and money laundering.
The current governor announced in a press conference soon after his accession that 10 weak banks would be monitored separately. In these banks, one officer of executive director level is appointed as observer. But the situation did not improve. In the first quarter of this year, defaulted loans increased to 1 lakh 82 thousand 295 crores at the end of last March. Although it has been shown on paper, the actual defaulted debt is around 5 lakh crores, according to various statements. Efforts are being made to show less by various concessions without taking effective action against defaulters.
Much of the world has already started reaping the benefits of adopting interest rate hikes and contractionary monetary policies to control inflation. Economists and bankers have suggested market-based interest rates in Bangladesh since long ago. However, after assuming office, the current governor said in a press conference in August 2022 that inflation will be brought under control within three months by taking ‘out of box’ decisions. The dollar situation will be fixed between November-December of that year. But almost two years later, far from improving, there has been further deterioration. Inflation is decreasing in most countries of the world but increasing in Bangladesh.
While other countries are waiting to move away from austerity policies, Bangladesh continues to adopt austerity policies. On May 8, the central bank took three tough economic decisions on the same day. Under pressure from the IMF, the interest rate on that day was left to the market, the dollar increased by 7 rupees to an intermediate rate of 117 rupees and the policy rate was hiked.