176.5pc growth during for BB governor Atiur’s 2009-2016 tenure
Defaulted loans rose by almost fourfold until the penultimate year of the successive tenure of the Awami League-led government amidst series of loan scams with masterminds behind those getting scot-free mainly for inaction of the Anti-Corruption Commission.
Economists and bankers noted that the incumbent government starting its previous tenure in 2009 failed not only to check the loan scams in the state-owned banks but also to contain the wilful loan defaulters because of alleged political reasons that led the defaulted loans to soar.
According to Bangladesh Bank data, the defaulted loans soared to Tk 80,307 crore in 2017, the penultimate year of the successive second tenure of the government, from of Tk 22,482 crore in 2009, when the AL-led government assumed office.
The defaulted loan grew by about 176.5 per cent between 2009 and 2016 amidst detection of loan scams of Bismillah Group, Hallmark Group and BASIC Bank by the Bangladesh Bank and moratorium period, a particular duration in the loan tenure when the borrower is not required to pay instalments, at least twice during the same period.
The period coincided with the tenure of former central bank governor Atiur Rahman, who resigned in March 2016 following the unprecedented reserve heist of $81 million in February 2016.
Former adviser to interim government Mirza Azizul Islam said that the banking sector was in totally disarray because of massive irregularities, lack of good governance and political meddling.
The defaulted loans already crossed double-digit mark creating uphill challenges for the policymakers, he noted.
Describing defaulted loans as a chronic problem in the country’s banking history and also linked to the growing capital flights, he expressed worry about the shabby condition of the state-owned banks.
Almost of half of the overall bad loans are lying with the public banks run by board of directors appointed by the government.
Classified loans in six state-owned commercial banks — Sonali, Agrani, Janata, Rupali, BASIC and Bangladesh Development banks — increased to Tk 42,852 crore on June 30, 2018 from Tk 37,326 crore on December 31, 2017, according to the central bank.
Bismillah Group swindled about Tk 1,100 crore from state-run Janata Bank in 2012 while Hallmark Group misappropriated about Tk 3,500 crore from largest state-owned Sonali Bank in 2013.
About 90 per cent of the bank fund is generated from savings from small depositors. BASIC Bank’s loan scams occurred due to extension of fictitious loans of over Tk 6,000 crore by the bank’s board of directors appointed politically and run by former chairman Abdul Hye Bacchu between 2009 and 2014.
The Anti-Corruption Commission failed to bring any charge against BASIC board of directors, including Abdul Hye Bacchu, although a central bank probe found the involvement of the former BASIC bank chairman in loan scams that led the once profit-making bank to face almost bankruptcy.
On June 30, 2015, finance minister AMA Muhith told parliament that action could not be taken against Abdul Hye Bacchu because of ruling Awami League leaders.
The government gave promotion to almost of all members of controversial board of the directors of BASIC Bank. Shuvashish Bose and Syam Sunder Sikder, two of the six public servants serving as directors to BASIC Bank, during the period of loan scams, had been promoted to secretary.
The Financial Institutions Division in a move is providing training to directors to safeguard interests of state-owned banks amidst experts’ scepticism about any positive outcome.
Former central bank governor Salehuddin Ahmed said that there would be no benefit from the training programme since problems of the state-owned banks were well-known to all. Lectures would make no change in the country’s banking sector now facing multifarious problems like growing non-performing loans, political intervention and hostile takeover, he said. He said that the government should show willingness to punish the politically motivated directors responsible for shabby condition of the state-owned banks.
The economists and the bankers also criticised the government for providing bailout fund to the scam-hit banks in the name of recapitalisation.
As per financial institutions division data, Tk 9,788 crore was sanctioned for the scam-hit state-owned banks, including Sonali, BASIC and Janata, between 2012-2013 and 2016-17. Sonali Bank was given Tk 3,005 crore in three phases to overcome its severe capital shortfall although it failed to recover a single penny from Hallmark Group scam.
BASIC Bank was given the highest Tk 3,390 crore in three financial years to meet its capital shortfall.
Janata Bank, facing a new loan scam of over Tk 5,000 crore extended to AnonTex Group, received the bailout fund of Tk 814 crore.Bangladesh Institute of Bank Management director general Taufiq Ahmed Chowdhury described the loan scams in the state-owned banks and recapitalisation fund provided to them from the public exchequer as a vicious cycle not seen before.He noted that the cycle should be broken so that the wilful loan defaulters become obliged to clear the debt.
Economists including former caretaker government adviser Wahiduddin Mahmud, former central bank governor Mohammed Farashuddin at a seminar of the Bangladesh Institute of Development Studies in the capital on November 11 said that the next government would face uphill task of restoring discipline in the financial sector infested with loan scams, growing bad loans and capital flights.