In no way we can say the banking sector is in discipline, says former BB Governor 

BB Governor Atiur Rahman is seen among the senior executives of different banks in Dhaka yesterday 

Bangladesh Bank Governor Atiur Rahman categorically said yesterday that discipline has been restored in the country's banking sector as he outright turned down the allegations of having indiscipline and disorder in the sector.

His remarks emerged at a function in Dhaka in the wake of rising concerns over the scam-hit banking sector. Former central bankers, however, refuted the claim and said the banking sector is still in disarray.

The central bank governor was addressing a signing ceremony on using the refinancing fund worth Tk200 crore for Tk10 account holders held yesterday at its headquarters.

“Those, who are thinking that the country's banking sector is not yet disciplined, are mistakenly using the term indiscipline,” Atiur told the function. “Banking sector may face different kinds of problems but it is important to see whether the banks are now working towards their main objectives.''

To defend his claim, he explained the call money rate remained at around 7% even before the last Eid festival when total transaction stood at around Tk55,000 crore. “Now tell me what does it mean? Is it an indicator of stability or instability?” he posed a question to the audience, apparently seeking its recognition to what he claimed discipline restored in the banking sector. 

He also demanded that financial stability came in the country's economy only due to giving importance on financial inclusion by Bangladesh Bank.

The BB governor recently came under wide criticism by the country's leading economists due to the central bank's relaxed loan reschedule policy, which mainly went in favor of the corrupt people.

The governor had awarded the facility to help banks reduce the burden of non-performing loans and facilitate the central bank to present an improved discipline in the financial sector.

But the rate of NPL rose further in the following two quarters, after temporarily going down to some extent last year ended in December.

The default loans of total outstanding dropped to 8.93% in December last year from 12.79% in September. But, the NPL rose further to 10.45% in March and 10.75% in June, according to the Bangladesh Bank data.

What seasoned bankers say?

“In no way we can say the banking sector is in discipline,” said Salehuddin Ahmed, former governor of Bangladesh Bank. “It is now completely disrupted due to lack of management and efficiency.”

He said internal governance has almost collapsed and the norms are not being properly complied with. 

Currently, he added, it cannot be said the banking sector is in discipline with having lack of corporate governance, transparency and efficiency.

Former Deputy Governor of the central bank Khondkar Ibrahim Khaled said the recent scams that took place in BASIC and Sonali Bank were due to lack of discipline.

The government, however, is still continuing to recover the banks through removing BASIC Bank Chairman and restructuring Sonali Bank. “But it will not be possible to bring discipline in the banking sector until the establishment of good governance.”

BB Deputy Governor SK Sur Chowdhury presided over the function while Executive Director Mahfuzur Rahman was present along with managing directors of 10 banks.

From now on, workers and marginal farmers, holding Tk10 account could get loan at a lower interest rate directly from the bank or through recognised micro finance institutions.

The number of Tk10 account holders stood at around 1.4 crore in June, according to the Bangladesh Bank data.

“It will increase soon as the agriculture ministry decided to issue more agriculture card. We will also increase the limit of revolving refinancing fund while the card will be issued,'' said Atiur.