The central bank will review all loans worth more than Tk 20 crore in a bid to restore good governance to the banking sector, Bangladesh Bank (BB) Governor Ahsan H Mansur has said.
“All loans exceeding Tk 20 crore will be reviewed afresh to see whether proper collateral exists. If not, the concerned officials and bank directors will be held accountable,” he said while addressing a seminar titled “Banking Sector Reform: Challenges and Way Forward”, organised by the Economic Reporters’ Forum (ERF) at its office in the capital’s Purana Paltan today (18 December).
He said the country’s banking sector is gradually moving out of a difficult phase and that public confidence in banks has largely been maintained.
“The global community is surprised that Bangladesh’s banking system is still running. To restore good governance and rebuild depositor confidence, the central bank will regularly review whether loans have been properly disbursed.
“A 500-member team has been formed for this purpose, including 50 officials being trained in forensic audit. There is no forensic audit capacity in Bangladesh’s banking sector. Without it, theft and irregularities cannot be detected,” the governor said.
He further said the team will also examine whether adequate collateral has been kept against loans.
“Banks’ head offices cannot evade responsibility for loans disbursed by branches. Branch officials could act as whistle-blowers if they detect irregularities, which the central bank will take into account.”
Stressing the need for an independent central bank, the governor said Bangladesh Bank requires strong leadership and legal backing.
“A law has been proposed to the government. If this government passes the law, it will be possible,” he said.
Referring to recent restructuring efforts, Mansur said that Shariah-based Exim Bank, First Security Islami Bank, Global Islami Bank, Union Bank and Social Islami Bank, which were struggling due to financial distress, have been merged, and a licence for “Sommilito Islami Bank” was issued on 30 November.
He also said that there is no plan for further mergers at this moment, but added that as many as nine troubled financial institutions may be liquidated.
The governor said all general depositors of these institutions will receive their full deposits with government support, while the shares of the directors will be reduced to zero and action will be taken against them in line with international laws.
“Institutional depositors will be paid after liabilities are settled. The government will be more generous in the case of general depositors,” he added.
Claiming progress in stabilising the overall economy, particularly in rebuilding foreign exchange reserves, balancing payments, remittance inflows, and import-export activities, the governor said stability has largely been restored.
However, he acknowledged that maintaining confidence in the banking sector remains a challenge and that success in this area has so far been partial.
He also said Bangladesh aims to raise its foreign exchange reserves to $35 billion by this year without borrowing from donor agencies such as the International Monetary Fund (IMF) or the World Bank.
Terming the country’s non-performing loan (NPL) ratio the highest in the world, the governor said many banks are facing capital shortfalls and alarming growth in default loans.
“I had estimated the NPL ratio would be between 25 to 27%, but in reality it has reached nearly 36%. But Bangladesh Bank will not hide any information. Many warned that revealing the truth would hurt credit ratings. Even then, I said the truth must come out,” he said.
Centre for Policy Dialogue (CPD) Executive Director Fahmida Khatun said the upcoming election marks a critical moment and urged political parties to clearly outline concrete steps and commitments in their election manifestos to reform and strengthen the banking sector.
“Political leaders must clarify whether the sector will continue to serve powerful capitalists or be used for public welfare, job creation, inflation control and financing small and medium enterprises,” she added.
Former Association of Bankers, Bangladesh (ABB) Chairman and Managing Director of Mutual Trust Bank, Syed Mahbubur Rahman, said, “The banking sector became fragile following the takeover of Islami Bank in 2017, which contributed to the rise in default loans to 36%.”
He further mentioned that the extent to which ongoing reforms will be carried forward depends on political will.
ERF President Doulot Akter Mala presided over the seminar, while General Secretary Abul Kashem moderated it.
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