Committee this week for amending Bank Company Act

DOT Desk: The financial institutions division will appoint a committee for bringing about changes in the Bank Company Act to check rising defaulted loans while the experts are sceptic about its success, reports The New Age.
Division secretary Asadul Islam told New Age on January 15 that an additional secretary of the division would lead the committee to be appointed in this week.
The committee will be asked to submit their recommendations soon, he said. The committee is going to be appointed following directive of before finance minister AHM Mustafa Kamal although the economists and local think-tank the Centre for Policy Dialogue have been demanding for a commission to find out reasons of the country’s abysmal state of banking sector. Former Bangladesh Bank deputy governor Ibrahim Khaled expressed doubt about the success of the proposed committee since it would be lead by a mid-level bureaucrat. Former central bank governor Farashuddin Ahmed should be appointed as the chief of the committee for bringing about meaningful changes in the Bank Company Act, he noted. He also noted that the central bank had to be empowered to regulate the state-owned banks. According to Ibrahim Khaled, the central bank has no power to regulate the state-owned banks that might be a reason for series of loan scams in the public banks in the past one decade.
On December 7, 2018, Centre for Policy Dialogue in a report revealed that Tk 22,502 crore was plundered from Bangladesh’s banking sector through major scams, irregularities and heists in the past one decade.
The local think-tank in the report included embezzlement of Tk 4,500 crore from BASIC Bank during the tenure of Sheikh Abdul Hye Bachchu as chairman of the bank between 2009 and 2014.
Abdul Hye, however, was not named in any of the 56 cases the Anti-Corruption Commission filed in connection of the loan scam although a central bank investigation found his involvement in giving shady loans to fictitious borrowers.
As of September 2018, defaulted loans in six state-owned commercial banks — Sonali, Agrani, Janata, Rupali, BASIC and Bangladesh Development — stood at Tk 48,080 crore or about 48 per cent of the bad loans of Tk 99,370 crore, 11.48 per cent of Tk 8,65,930 crore outstanding loans in the country’s banking system and much higher than bad loans of 2 per cent in Nepal and 7 per cent in India.
In July, the Federation of Bangladesh Chambers of Commerce and Industry demanded a high-skilled task force to address the problem of non-performing loans in the banking sector.
Earlier in April 2018, the financial institutions division recommended five measures, including regular disclosure of identity of big loan defaulters, establishment of cells in the central bank to monitor defaulted loans of over Tk 100 crore and constitution of a separate High Court bench for speedy disposal of writs on loan recovery.
The recommendations were prepared from suggestions given by policymakers, bankers, banking experts and bureaucrats at a seminar in August 2017.
The provision for publication of names of defaulted borrowers stipulated in the Bank Company Act 1991 was never enforced by the central bank while constitution of a separate High Court bench for speedy disposal of writs against loan recovery remained unaddressed by the law ministry.