Banking sector: Irregularities and mismanagement

Dr. Foqan Uddin Ahmed writes for DOT :
The central bank came into being 300 years back. Since its inception, it plays a significant role in the rise and fall of economy. The central banks act as the guardian of all other banks and financial institutions. The central bank also fixes up the interest rate, targeting the foreign exchange rate. Above all, it acts as a chief agent or controller of all government banks, non-government banks and financial institutions. Very recently, bank owners association’s declaration of bank rate and its other activities made the role and the responsibilities of Bangladesh Bank a very questionable matter. This is indeed very con cerning for the nation.
Previously, the government exclusively played the role to control market economy. The objective was to encourage competition, control monopoly marketing and to ensure public consumers and investor’s interest. Somehow, for various reasons, its performance was not found smooth and satisfactory. Later on, regulatory bodies like central bank, energy regulatory commission were set up for banking and energy sectors respectively. It was observed that these bodies also turned out to be non-effective. These bodies also fail to discharge their statutory responsibilities. It is noted that the bank owners are influencing finance ministry, central bank and even the parliament. From the pressure of those bank owners, they have increases the number family board members from 2 to 4 and their term has been made from 6 to 9 by an amendment of bank company act. Moreover, making cash reserve ratio 1 is there significant credit. Does it see the bank interest? Again repo rate has been reduced to 0.75%, deposit reigns of non-government bank have been upgraded to 25% to 50 %, and finally they have declared 9% interest loan and 6% dividend on deposit scheme. The banks are following these instructions. As a result, the bank will face the problem of default loan and the crisis of corporate management.
We know that the regulatory bodies failed to perform smooth functioning in 1996 and 2001. As a result a good number of small investor in stock exchange securities became helpless. For Bangladesh Bank’s in efficiency bank reserve was hacked and farmers’ bank irregularities happened. In 2011 the money liquidity was raised. It was nothing but a created phenomenon and consequently share market had fallen in catastrophe and default loan has increased alarmingly. This affects other sectors also like government expenditure and revenue management, which had the side effects in the achievements of other avenues this is a bad signal for nation. The authority concerned must take care of such anarchy, anomalies and bank owner’s association or other vested corners. In the situations, bank may face crisis and country will suffer from shortfall of monetary fund. Ultimately, bankruptcy will affect the banks and the financial institutions. Life of general people will be in severe problem. Peoples trust will be misled and even the image of banking system will be a matter of fair and doubts. To save the banks from the turmoil situation, the glass stegall Act 1993 was in acted. It was mandated only two restore and ensure the confidence of the deposit holders. By this act the deposited money was made safe from money laundering or anomalies of bank.
To overcome in efficiency one must be well trained by series of training, short courses, study and research works, seminar etc. They must be specialized in order to oversee the bank activities very frequently. If irregularities are found they must be properly checked, scrutinizes and investigated. In banking sectors for its smooth functioning, they should be the provision of timely auditing, supervision and monitoring. And it should be very much continuous. Finally, the bank officials must be progressive and effective with qualities of good servicing, personal behave, attitude, honesty, sincerity and good understanding with their clients. Once faith is established and good professionalism is developed bank will run with honor and dignity.
The central bank is supposed to control banking sectors and fix up the monetary policy. But we see the different picture. It is undoubtedly a sad picture for the nation. The central bank has become a puppet according to reports from the media. In our country, there are regulatory bodies but they cannot perform their duty with freedom. Either the appointed chiefs are biased and manipulate things along with the vicious circle, or they are given authority but they cannot exercise it properly; for they are weak and waste it by the interested groups.