Are the criticisms misplaced?
The finance minister recently told the chairpersons and directors of state-owned banks that those who highlight the sorry state of the banking sector—the culture of loan default, the flouting of set banking norms, etc—are all uninformed. Such a remark coming from him is disappointing, given the fragile state of the banking sector as a whole.
Surely, the media, banking experts, think-tanks, various chambers of commerce and industry, the World Bank, etc—in essence, all the non-state actors who have been highlighting the many problems prevalent in the state-owned banks—cannot all be uninformed. On what count are the critics wrong? The finance minister has, on record, riled many times about the poor state of affairs in the state-owned banks. And it stems from the fact that there is poor management in these banks where malpractices in loan sanctioning are rife. There is little by way of appraising of applications for loans, and undue influence of senior management officials has also been cited in many reports by the Bangladesh Bank.
The government has bailed out state-owned banks year after year without initiating any of the changes recommended by banking experts. Indeed, we are also witness to the bailout of private banks—all without any commitments from these financial institutions that they would reform their management and restore sound banking policies. This is a matter which should not be swept under the carpet. Instead the reality should be acknowledged and effective measures to stop the malpractices and derelictions that are plaguing the banking sector should be initiated immediately.