DHAKA: The economy of Bangladesh has expanded significantly in 2017, despite ups and downs in the performance of major economic indicators. The financial sector however faced a number of serious challenges, which could threaten the progress in the future.
According to the Centre for Policy Dialogue (CPD), a sound financial sector is the key for a sustained economic development for any country. It facilitates the financial mechanisms between borrowers and lenders, helps expedite capital accumulation, and ensures use of resources into productive sectors.
However, in 2017, the country’s financial sector, especially the banks, faced a severe governance crisis, which caused the industry to face a record increase in non-performing loans (NPL), financial scams and liquidity shortages.
The amount of defaulted loans in the banking sector at the end of September, 2017 stood at Tk80,307 crore, while the amount at the end of December, 2016 was Tk62,172 crore. Which indicates that default loans amounting to around Tk18,135 crore was accumulated during the nine months of 2017.
Over these months, the fourth generation banks that emerged, allegedly on political considerations, quickly became a burden on the government. Two of these new banks– the Farmers Bank and the NRB Commercial Bank, were found entangled in irregularities, and contributed in destabilising the entire banking industry.
The Farmers Bank has been facing liquidity crisis and the depositors are now seriously concerned over getting back their deposits.
Under the circumstances, the government came up with the Banking Companies (Amendment) Act-2017, which permits four family members on the bank board of directors for nine consecutive years and allows granting licenses to new banks.
The central bank however took action against some irregularities, such as removing the managing directors of two scam hit banks.
