High Court’s timely observations

We commend the High Court for its verdict that stressed the need for preventing financial scams in the banking sector. The court gave its full verdict on the writ petition filed last year by a rights organisation that had sought its directives for the formation of a commission to look into the irregularities and corruption in the banking sector over the last two decades. In the verdict, the HC gave directives for analysing the recent banking scams to prevent such irregularities in the future. While it has emphasised the need for modernisation of the banking policies, it has also observed that senior management in the banks, including boards of directors, must be transparent and accountable to the Bangladesh Bank for sustainable economic growth.   

Unfortunately, some financial scams in recent years involving several institutions, including Hallmark, BASIC Bank and Bismillah Group, have put our financial sector in a tight spot. Large-scale bank loans had been scheduled and rescheduled due to intervention from the authorities. Many banks had rescheduled their default loans without taking the required down payment, which made the banking sector more vulnerable. As of September 2019, default loans in the banking sector stood at Tk 116,288.31 crore, according to data from the central bank. A specialised mission of the IMF's Monetary and Capital Markets department, which visited Bangladesh twice last year, observed that a large number of defaults were "by choice" and not due to any unexpected financial hardship.

While it is good to learn that the regulatory bodies including Bangladesh Bank have taken some measures to prevent banking scams, and that the Anti-Corruption Commission has been investigating some of the recent scams, the central bank should take more initiatives for stricter monitoring. As the HC has ordered the BB to form a nine-member committee comprising banking experts to find out the loopholes in sanctioning, distributing and recovering the loans, and to make necessary recommendations, we hope the BB will comply with the HC directive. Moreover, the central bank should take into account the suggestions made by the economists and former bankers as well as recommendations of the IMF and the World Bank for the necessary reforms in the sector.