BB must stop breaking its own rules

For some time now, we have been seeing the central bank flouting its own rules and regulations, swaying to the tunes of big business conglomerates, and giving in to various external influencers. Its decision to permit Aviva Finance—which changed its name from Reliance Finance in November last year to brighten its image and restore depositors' confidence—to open five more branches, despite the financial health of the non-bank financial institution (NBFI) being in a bad shape, is another glaring example of that. This is the second time in a span of two years that the Bangladesh Bank (BB) has allowed Aviva Finance to open new outlets—last year it was permitted to establish four new ones—despite the NBFI's default loans surpassing 10 percent of its total outstanding loans in the year preceding its filing of the application to open new branches, which goes against the BB's own rules.

The non-performing loans (NPLs) of Aviva Finance stayed above the threshold last year, and rose to 26 percent in September this year, up from 16 percent towards the end of December in 2020. Furthermore, the NBFI also faced a provision shortfall of Tk 27 crore against the outstanding loans as of June this year, which further disqualifies it from opening any new outlets. Then why did the central bank give the NBFI permission to open so many new outlets over the last couple of years? Reportedly, Aviva Finance is a concern of Chattogram-based business conglomerate S Alam Group. And over the last few years, we have seen the BB bend to the will of big businesses a number of times. And it is precisely during this time that our banking and financial sector has gone through the greatest turmoil in its history.

But then, just blaming the BB might be somewhat unfair, as the amount of interference from other government institutions into its functioning in recent times, such as by the Ministry of Finance, has all but destroyed the central bank's autonomy, which is another reason why we have seen it fold to the illogical demands of powerful quarters time and again. The long-term implications of its decisions to not abide by its own rules, and to repeatedly give special concessions to politically connected and influential individuals and businesses, will have devastating consequences for our financial sector and overall economy, as experts have warned.

We hope the authorities are aware of this. There is a reason why rules exist. And when the BB keeps on breaking its own rules and provides special concessions to its hand-picked candidates and businesses, the example that it sets is surely going to only negatively impact our financial sector which, in turn, will have a cascading effect on our overall economy. As such, the central bank immediately needs to return to strictly enforcing its rules uniformly across the board.