State banks still dogged by malpractices

State banks continue to be afflicted by large-scale financial felonies despite the government efforts in recent years to stop picking up board members on political consideration.

"Not that we are always successful, as bad hats also make their way to the board," Finance Minister AMA Muhith told reporters at the secretariat when he was asked about the loan scandal at state-owned Rupali Bank.

Rupali has lent Tk 151 crore to a gold trader in Feni without much scrutiny. Of the amount, Tk 60 crore was approved by the board and the remaining Tk 73 crore was lent without any approval, the Prothom Alo reported yesterday. Documents related to the loans have disappeared.

A number of branch managers admitted that the loans were given to gold trader Anwar Hossain because of instructions from 'the top', indicating the management and the board. 

The role of a deputy managing director has also come under question.

"Irregular activities take place in the banking sector. Large loans are given without collateral. In many cases acquaintances get loans -- and particularly those who are acquaintances with the people in the board and management."

To contain the irregularities in the banking sector, people from different spheres of society are made members of the board.

"There was a time when we used to put many people in the board on political considerations. But this has come to a stop for a long time now."

"More or less, we appoint board members on the basis of their expertise. The existing boards of the banks are more objective and public-spirited."

He said the dismissal of managing directors from state banks has taken place under the current government. "That should be a sign -- we are strict to a considerable extent."

In May 2014, the central bank removed BASIC Bank Managing Director Kazi Faqurul Islam for failure to take actions after a host of financial irregularities involving about Tk 3,500 crore had been detected at the bank between 2012 and 2013.

The case at Rupali Bank brought to the fore the fact that the state-run banks in Bangladesh are far from overcoming the serious financial irregularities that have been dogging the sector for the last several years.

Continued weakness in the state-owned banks could undermine growth prospects and affect fiscal sustainability, said the World Bank in October.