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11th-Sep-2018

More new banks under political consideration will ruin the economy

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THE Bangladesh Bank has given approval to one more new commercial bank and at the same time, licenses of two other banks are under process, according to a local newspaper report. It said the new bank has gotten approval under political consideration. Especially, different power brokers are creating severe pressure on the government to allow more banks for operation just a few months ahead of next 11th parliamentary election.
We know, the number of commercial banks in the country is several times higher than that of desired level. So, the formation of new banks will contribute fresh anarchy to the banking sector. In comparison to the size of our economy, around 15/16 banks were more than enough for financial operation. But at present, 59 banks are now operating. What is interesting is that, most of the banks do not follow the rules and procedures of the central bank where siphoning of money by a section of directors is a common feature. Moreover, majority of banks are overburdened with big amount of bad loans. According to Bangladesh Bank data the defaulted loans stood at Tk22,644 crores at the end of 2011 and six years later the amount swelled to Tk74,303 crores. The state-owned Sonali Bank has the highest amount of defaulted loans followed by BASIC and Janata Bank. Of the private banks, Islami Bank tops the list of banks with highest default loans.
There are widespread allegations that massive irregularities were occurred in disbursing loans by both the state-owned and private banks in the previous years. In particular, the loans given out through irregularities have turned into defaulted loans.  Any smoothly-run economy may get hit by a serious liquidity crisis whereas it is a regular phenomenon of our banks. Recently, a first generation private bank failed to honour a cheque of Tk 15 crore. In many cases private banks were unable to lend money to its clients.
We are surprised that without bringing the corrupt bankers and businessmen to book for misappropriating people's deposit, the government is allowing fresh banks under mere political consideration.