Curbing NPLs a losing game?

Despite efforts by the central bank to restore some modicum of financial discipline in the state-owned banks with regard to nonperforming loans (NPL), the total loan amount on December 31, 2017 had increased to Tk 74,303 crore, an increase of 20.89 percent over the preceding year. This is the cumulative effect of the failure to rein in on the loan scams that seem to have engulfed the public banks in general. While there were some attempts to show a lower NPL figure by some banks to please an irritated central bank, the fact is, with the exception of Agrani Bank, which managed to recover Tk 1,860 crore in the last quarter of 2017, the hard drive to recover bad loans has not been seen in most of the other state-owned banks.

This brings us back to the principal problem of addressing the hard questions that have engulfed the management and boards of SoBs, i.e. what to do about financial scams? Repeated prodding from Bangladesh Bank will not go anywhere as long as the political will to bring those involved in these banks to answer for their crimes is missing. We are all aware of the probe committees and whilst many of their findings were never made public, those involved in the preparation of these reports have voiced their opinions publicly.

The big sums involved in default loans that have now grown to double digit sums in the big banks have had an adverse impact on the banking sector. That policymakers have failed to check corrupt practices in these banks speak volumes about where the financial sector is heading, and we believe the central bank should be given the tools to play the role of an effective regulator so that some semblance of financial discipline can be restored in the banking sector.