If God was a banker

I have borrowed the caption for the column from a book written by Ravi Subramanian. Though the book carries an insider's fictionalised account of how Indian professionals experience the world of foreign banks, in my today's humble write up, I will be focusing more on Bangladesh banking.
A popular electronic channel runs a programme named 'Bank is our friend'. There, I have heard many senior bankers talk about the role of banks in a country's economic development and economic value creation through wealth management. Look around by yourself, look at the light bulb someone must have imported this or manufactured this, which required bank financing or trade facilitation, look at a school or college it may be self funded or put up under an annual development program, but the money flowed through a bank, not to talk about large industries, infra-structure projects, inward remittances, payment services, consumer loans, credit cards, ATM, mobile commerce and many more. The role of banks in the market capitalisation in the local stock exchanges is tremendous; bank shares occupy almost 50 percent of market capitalisation and turnovers. Banks are getting increasingly engaged in SME financing, agricultural lending, project finance, cash management and thereby getting more identified in the development process of the country.
Yet, banks and bank officials are regularly being put on the dock by intelligentsia, political regime, and even by the bank regulators. Anybody and everybody are talking about reduction of bank's interest rate, banks failing to support growth, making too much money etc. I heard a person talking in a Lions club meeting on how bank's high interest is hampering the poverty reduction in Bangladesh. On the other hand, banks and their senior officials are receiving regular letters from various cultural organisations, charities, educational institutions to support their activities through grants, even to support building an army Golf course, under their corporate social responsibility.
We often hear regulators or the ruling regime being unhappy about commercial banks' making too much profit (I even don't know the definition of 'too much profit' though I know, earnings or profitability is a significant contributor to share price and banks rating). If banks have excess liquidity (again a significant contributor to banks' credit rating), the business leaders want to gobble that at throw away prices, if the banks are borrowing from the inter-bank market, they are being penalised or reprimanded by regulators/watch dogs.
I know of a bank, which disbursed a large chunk of money to rural Bangladesh after the floods and cyclone, through several NGOs at a competitive cost. In order to do so, they had temporary dependency on the inter-bank market. When the inter-bank call market went high, they wanted to refinance under the priority sector lending support, but they were declined. When they wanted money under 'Repurchase or REPO' arrangement, they were asked to come through a 'Primary Dealer', and when the said bank went to a primary dealer- it was told, the primary dealer has been asked not to lend money to another bank by borrowing/ taking money from the 'lender of the last resort'.
The Oriental Bank scam revealed how state owned banks or government agencies were influenced to keep deposits with that bank or lend money to them instead of the better rated banks. Nobody, even the investigating journalists asked the question-who influenced the process, or who phoned the NCBs or public sector entities to lend or put money with that 'failing' bank?
We also know of the 'Omprakash Agarwal' scam, where few bank top guns lost their jobs for negotiating/discounting fictitious export bills and ending up with weak/bad loans. At the same time, we also witnessed-how subsidy was released against those exports. We talk of developing competent and forward looking resources in the country's banking sector, but we have never investigated how many relatives of the `high ups' had to be appointed in the commercial banks under duress.
Government high ups, civil society members talk of facilitating foreign direct investment, but nobody keeps a track of how 'buying a stake in a local company by a foreign entity' or vice versa or 'market entry' of a global corporation is being delayed or declined due to the ignorance or inefficiency of the 'approval raj'.
Now coming back to the favourite topic of interest rate. Not to talk of the big talkers or so called economists, I have not seen any study, estimate or report, which says interest rate, not access to credit, is the main hindrance towards poverty reduction or growth facilitation. We had the 'subsidy' or 'dictated loan' regime in the past years, why poverty did not reduce as expected- nobody knows.
Look at the success of professor Yunus and his colleagues in the micro-finance sector, their main goal is to reach more poor people at the bottom of the pyramid with more financing, interest rate is not a factor. The Development Financial Institutions (DFI) have lent so much money at subsidised or reduced rates, what value added- bad loans, revealing irresponsible way of handling with banks asset.
On the other hand, those poor women in the villages paid in the full money to the MFIs with diligence and smiling faces. Study revealed high interest rate regime (not to talk about their loan ticket size, high administration costs, geographic positioning of the target market and other hurdles) also at times helped the MFIs to stay away from irresponsible loans or bad loans. To tackle the high import price of essentials, the regulating agency forced the commercial banks, to lend to the commodity traders at a 'fixed price', could it influence the retail price of the essentials? Readers know it better.
In view of the above, I have been thinking- if God was a banker what would he have done, to face the challenges of lowering interest rate in a high inflation regime, contributing more to the national exchequer without increasing the earnings, diverting funds to the hungry streams of the economy, building up world class resources 'without fears and favours', etc. What God would have done, while the banks are forced to sponsor cricket, musical soirees or building up golf course or even conference of a pseudo political organisation in the name of the buzz word- 'Corporate Social Responsibility'.

The writer is a banker and an economic analyst.