The general public is fast losing its confidence in banks to the point that the sector has become the main weak point of the government, said Finance Minister AHM Mustafa Kamal.
“We should find out why the public confidence is depleting,” he said at the annual conference of the state-owned Janata Bank, held yesterday at the Krishibid Institution Bangladesh auditorium.
He went on to state that he is yet to establish the real picture of the banking sector since taking helm of the finance ministry at the turn of the year. “Action will be taken only after conducting special audit,” Kamal said, while insinuating that board members with no knowledge on the banking sector will be removed.
He said many retired bureaucrats are lobbying with him for a directorial post in state banks.
“Board members will have to have subject specific knowledge. They will have to face interviews to get the post.”
The government will show zero tolerance against corruption, he said, adding that the banking sector will soon see reforms.
He went on to warn the dishonest businessmen that they will not be given any mercy for defaulting on loans.
Bangladesh Bank Governor Fazle Kabir stressed on the importance of corporate governance on fending off advances from shady business people.
“Corporate governance is very important and all banks will have to ensure governance in their organisations.” The rising amount of non-performing loans (NPL) is the main concern for the banking sector and Janata tops the list.
At the end of 2018, Janata's NPL stood at Tk 17,224 crore -- the highest amongst banks -- up from Tk 5,818 crore a year earlier. “Janata's NPL situation deteriorated tremendously along with some other indicators.”
The bank's huge capital shortfall badly hit its profitability, he said, while urging Janata to find a way to come out from the huge loss.
In 2018 Janata logged in net losses of Tk 6,063 crore, down from Tk 268 crore in the profit the previous year, according to the central bank.
This was the first time a local bank has incurred such a huge amount of net loss in a single year in recent history.
Md Abdus Salam Azad, managing director of Janata Bank, attributed the spike in NPL to two big defaulters: AnonTex and Crescent Group.
Janata had lent to the two business groups without conducting proper due diligence.
The bank will overcome the ongoing crisis this year by intensifying its loan recovery efforts, he said.
“We have already recovered about Tk 1,200 crore this year.”
Janata's credit base expanded 16.13 percent last year and deposit base 4 percent, according to Azad.
Its loans-deposit ratio increased to 79 percent from 71 percent at the end of 2017.