Govt starts working on bank commission

The government has finally  started working on forming a bank reform commission to review the  sector’s health and take necessary remedial measures, finance ministry officials said.

Finance Minister AHM Mustafa Kamal has already talked to some former bankers, bureaucrats and economists, whom a ministry official believes are probable chairman and member candidates of the commission.

According to the official, the commission is likely to be formed by this month if the members are finalised.

While unveiling the budget for fiscal 2019-2020 in June last year, Kamal said a banking commission would be formed at the earliest.

Six months on, the commission is yet to be formed.

His predecessor AMA Muhith had several times announced that he would form the commission.

Bangladesh’s banking sector has been deteriorating for the last few years owing to increasing default loans and corruption.

The sour loans average 10.69 percent of the total outstanding loans while, in case of state-run banks, over 25 percent. The actual size of bad loans is, however, more than double the officially recognised figure, according to a recent report of International Monetary Fund.

The finance minister recently gave defaulters a chance to have their loans rescheduled by making a 2 percent down payment.

The central bank recently decided to cap the interest rate on industrial loans in a move that would be a boon for manufacturers as their cost of funds would go down to single digit at the expense of banks’ profitability. 

But experts and economists say the bad loan situation would not improve without good governance in the banking sector.