More efforts needed to cut banking graft: ICCB
More efforts are needed to tackle the banking sector's deep-rooted problems of corruption and poor risk management practices, according to International Chamber of Commerce Bangladesh (ICCB).
Until now, limited actions have been taken to penalise defaulters, improve risk management and strengthen bank management, said Mahbubur Rahman, president of the chamber.
“The Bangladesh Bank must ensure that commercial banks follow the regulatory measures,” he said in a statement.
He spoke at the closing ceremony of the ICC workshop on importance of compliance in trade finance, at a city hotel on October 7.
Rahman said non-performing loans is one of the issues that are impacting the capital adequacy of the banking sector, especially the eight state-owned commercial and specialised banks.
Capital adequacy is the primary indicator of banks' financial fitness and stability and banks are required to maintain at least 11.81 percent capital adequacy ratio (CAR).
But as of June, banks' CAR in Bangladesh stood at 10 percent, down from 10.11 percent a quarter earlier, Rahman said.
He said for decades, state-owned banks have been the prime lender to the large corporate borrowers, particularly in the industrial sector. Since 2009, the government has injected Tk 14,505 crore into the state-owned banks but they are yet to show any sign of strengthening their capital base.
According to the statement, the total loan in the banking sector amounted to Tk 752,730 crore. Of the sum, Tk 80,307 crore or 10.67 percent of the total was bad debt.
“And if the restructured or rescheduled loans were included, the NPL in the banking sector goes up to 17 percent of the total outstanding loans,” Rahman added.
Non-compliance in trade financing risk is having an impact on Bangladesh's overall risk rating, said Muhammad A (Rumee) Ali, chairman of the banking commission of ICCB.
“In fact, in Bangladesh it raises the cost of accessing trade finance products in the international market.”
Helal Ahmed Chowdhury, a supernumerary professor of the Bangladesh Institute of Bank Management, said risk management and compliance are more important in the financial industry than ever before.
“For us, they are also part of building genuine relationships with our customers.”
Ataur Rahman, secretary general of ICCB, and Sudhakar Sanjeevi, senior officer of the internal control department at Rakbank in the UAE, also spoke.
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