Owners bankrupting private banks
Crony capitalism at its worst
Bad loans in the 57 state-owned and private banks in operation, have piled up to the tune of Tk 84,054 crores. This figure is more than 10 percent of all outstanding loans totalling Tk 810,011 crores. And much of the outstanding money is owed by the owners of many private banks who happen to be directors of the banks too. It is the odious nexus between owner-directors of private banks that help them to take loans from each other's banks with no intention of paying them back at all.
Loan default has become a culture of big business houses and businessmen, and these people thrive on taking loans, defaulting on them and then getting the banks to reschedule the loans, through mutual understanding with other director-shareholders, and eventually get them written off as irrecoverable. This has been made easier by the amended Banking Act that has allowed for up to four members of the same family to be directors in a bank. Unfortunately, this dangerous practice has been sustained by the structural weaknesses in the banking sector, where, among other things, the process of giving loans have been thoroughly corrupted.
The systemic flaws in the banking sector have not been rectified over the years; rather they have now become well established practices. The carnal bank's power has been weakened further by the aforementioned banking act, and the private banks are now actually run by owners rather than professionals. The central bank must strengthen and exercise with due diligence its regulatory authority and move strongly against illegal practices, disregarding extraneous influence and pressure, if some semblance of order is to be restored in the banking sector.