Bangladesh Bank Governor Atiur Rahman yesterday urged the government to immediately take corrective actions against the wrongdoings of the state-owned banks in an attempt to boost depositors' confidence.
“I don't have full control over the activities of the state-owned banks. The government should play a complementary role,” Rahman said at the monthly luncheon meeting of the Foreign Investors' Chamber of Commerce and Industry at Sonargaon Hotel in Dhaka.
Rahman's comments come at a time when BASIC Bank's default loans continue to spiral in the face of irregularities, despite the central bank's efforts to keep it in check.
While the central bank on May 24 removed BASIC Bank's managing director Kazi Faqurul Islam for his failure to check the irregularities, the government is yet to take any action against the main accused, Sheikh Abdul Hye Bacchu, the bank's chairman.
“Despite several scams, the banking sector still remains stable.”
Rahman went on to recommend more expenditure on the services sector to create jobs. “We should focus on the service sector as it will provide more jobs in coming days.”
Foreign investors should invest targeting the growing middle-class as the average rate of return is the highest in Bangladesh among the Asian countries, he said.
On the proposed budget, the governor said: “The size of the budget is not big if we adjust it with inflation.”
Rahman also hailed Finance Minister AMA Muhith for keeping the budget deficit below 5 percent of GDP as the government will not depend too much on bank borrowing.
The governor, however, opposed the imposition of tax on capital gains in the capital market. “We need to rethink capital gains tax to protect the interest of small investors.”
On monetary policy, Rahman hinted that BB will continue with its credit growth stance.
“Inflation is the biggest enemy of the poor. So, we will not allow money to overflow in the unproductive sector in the second half,” he added.
Rupali Chowdhury, president of FICCI, called upon the governor to simplify the procedure for foreign exchange transactions in a bid to attract more foreign investment in the country.
Geoff Strong, vice-president of FICCI, also attended the event.