You are on page 1of 3

Corruption in the Banking Sector of Bangladesh

Discipline in the banking sector is apparently under strain. At the same time
criminal activities in banks have increased. In the absence of good governance,
many banks have indulged in irregular activities and corruption. Sensational stories
are emerging from the banking sector. As a result, customers are losing confidence.
As no firm action has been taken against those responsible, these events are
multiplying. Apart from Sonali Bank scandal, the central bank has found cases of
cheque forgery, investment fraud and irregularities in some other banks.

Bangladesh Bank, for example, has detected irregularities in disbursement of loan


by BASIC Bank. This bank has disbursed loans of Tk 60 billion (Tk 6,000 crores) in
three years out of which Tk 30 billion (Tk 3,000 crores) was advanced in irregular
manner. Loans of Tk 25 billion (Tk 2,500 crores) were given from three branches.
These loans were given without any proper system. Names of the loan recipients
have been published in a newspaper. Names of the branches are Gulshan,
Santinagar and Dilkusha. These loans have become a burden for the BASIC Bank.
The officials responsible for such loans were not taken to task rather they were
promoted.

It is alleged that loans have been given to fake companies because of political
pressure and connivance of dishonest bank officials. Directors of state-owned
commercial banks appointed on political considerations have allegedly played an
important role in this regard. Millions of Taka has been withdrawn in the name of
fake companies by opening local letter of credit. Although many irregularities have
been detected by the central bank, no punitive action has been taken against banks
and bank officials. Letters have been issued to the chief executives of the banks
several times.

Hall-Mark scandal of Sonali Bank is unprecedented and did have a negative impact
on the banking sector. Hall-Mark Group and some other groups of businessmen have
taken Tk 35 billion (Tk 3,500 crores) from Ruposhi Bangla Hotel branch of Sonali
Bank through local letters of credit. Depositors of this bank have become worried.
The banking sector makes progress on the strength of client confidence. The central
bank will have to be more careful so that confidence on baking is not shaken.
Political influence is making the banking sector risky. Governments management is
also responsible for indiscipline in the banking sector. Rules of granting loans have
been neglected.

Plundering of resources is taking place in state-owned commercial banks. Loans are


being advanced in the name of fake companies. There is little prospect of
recovering such loans. Bangladesh Bank is busy with state-owned commercial
banks and is hardly able to inspect the private commercial banks for shortage of
manpower although irregularities have also been noticed in private commercial
banks.

The banks are signing loan agreements without looking into management of
liquidity problems. Granting of risky loans due to political considerations is creating
pressure on liquidity. The central bank has produced a detailed guideline for the
management of banks. But this is not being followed. It is alleged that chairmen of
the banks interfere in the work of the banks going beyond their authority. This is a
violation of central bank rules. The tenure of chairmen of state-owned commercial
banks has been extended despite allegations against them.

Because of a non-transparent and weak financial system, we are not only losing
foreign investment but we can not invest our own resources in our development
projects. Our surplus resources are being transferred abroad. Swiss bank money is
mostly owned by the rich merchants of Africa and Asia. The foundation of our
economy is eroded for lack of transparency, accountability and absence of
monitoring in our banking system. The comments of the finance minister is
encouraging the corrupt officials. The health adviser has allegedly tried to influence
the anti-corruption commission. Bangladesh Bank requested the government to
break up the board of directors of Sonali Bank but the finance minister did not agree
to do this.

It is suggested that a judicial enquiry may be held to look into the Hall-Mark affair
and punish those found responsible. Political connections must not block justice.
The government will be held responsible for any failure in punishing the culprits.
The National Board of Revenue (NBR) has found that none of the companies of the
Hall-Mark Group paid corporate tax so far.

It is reported that during the last three and half years, about Tk 100 billion (Tk
10,000 crores) has been plundered from the four state-owned commercial banks. A
big chunk of this money has allegedly gone into the pockets of politically influential
people and much has possibly been transferred abroad. There is clear evidence of
lack of transparency in appointing the board members of the banks.

Bangladesh Bank has to bring back discipline in the banking system. The
government will have to cooperate in the process otherwise nothing will happen.
Only professional people may be inducted in the boards of directors. Sincerity of the
government is crucially important. Good governance in the commercial banks is the
need of the hour. It is alleged that loan default is not being properly reflected in
bank accounts. This is a serious lapse and an example of corrupt practice. Have we
gone down so low?