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No new bank needed

Economists, bankers oppose govt move

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Kazi Zahidul Hasan :
Economists and senior bankers have opposed the government move to issue licences to new banks saying it would be detrimental to the banking industry as well as the economy as a whole.
They opined that financial health of many banks, including the nine newest ones, was deteriorating and so there was no need of new banks.
"Issuing of new banks' licences in the present situation would be detrimental to the banking industry when many banks have already plunged in crisis due to mismanagement and corruption," Dr Salehuddin Ahmed, former Bangladesh Bank (BB) Governor, told The New Nation yesterday.
He said the government is going to issue licenses for new banks despite objection from the central bank. So, it is government's political decision to launch more new banks. This will not bring any good to the banking sector, says our previous experience.
 "The government initiated the move for the benefit of the businessmen and influential persons," added Dr Salehuddin Ahmed.
He also said that corruption and indiscipline galore the whole banking industry. The government should restore order in the banking sector first and then think of new banks.
 "The government has asked the BB to complete the primary process for issuing licences to two more private banks when the whole banking sector is in disarray for lack of proper control and irregularities," Dr Khondoker Ibrahim Khaled, former BB Deputy Governor told The New Nation yesterday.
Opposing the government's move, he said, "BB earlier issued licenses to nine private banks as per the government instruction. These banks turned insolvent within a short period due to mismanagement and corruption."       
Dr Ibrahim Khaled further said, the prevailing situation is not favourable for new banks. The government should review its decision in the interest of the country's economy.
 "It is not the right time to have more banks. The banking sector now stands at over saturated landscape and there is no need of new banks," Mamun Rashid, a senior banker and economic analyst, told The New Nation yesterday.
He said the government earlier approved licenses for nine private commercial banks under political consideration. The sponsors of the banks have 'miserably' failed to operate them, as they lack expertise and experience. As a result, these banks are now bleeding with default loans.
Vehemently opposing the move, Mamun Rashid said, "The government should give a second thought on issuing new bank licenses when most banks are struggling to stay afloat.
 "If the government goes to issue license to new banks, it will once again create an opportunity for the vested quarter to ponder public money from the banks," he warned.  
The Finance Ministry on November 15 sent a letter to the BB asking it to take measures required to issue the licences for two new banks. BB had turned down the licence requests of the two banks in September on the ground that financial health of many banks, especially the newest ones.
The BB later changed its decision after the government high-ups instructed the regulator to approve the two new banks.
Earlier, the Finance Minister AMA Muhith defended setting up of more new banks in the private sector.
 "Despite giving licences to so many banks there is still a huge unbanked area. We are not very advanced that way in banking," he said it at a function in Dhaka recently.
 "The BB had issued licences to nine banks in 2013 to fulfil the government's political wish and their conditions have already worsened. The government should learn from the past while allowing any new bank," Dr Ahsan H Mansur, Executive Director of the Policy Research Institute, told The New Nation.
 "Fifty seven banks are now operating in Bangladesh and operation of more banks will not bring any good to the financial sector," he added.

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