Sunday, May 19, 2019 | ePaper

Banking sector's health deteriorating fast

Loan irregularities spread as 'contagious' disease: Dr Salehuddin

  • Print
Special Correspondent :
Health of the banking sector is deteriorating rapidly and it may have huge negative impact on the economy, said a former central bank governor on Wednesday.
"Large non-performing loans (NPLs) in both state-owned and private banks, corruption, loans scams, poor risk management practices and lack of good governance are some of the causes behind the ailing health of the sector," Dr Salehuddin Ahmed told The New Nation yesterday.
He said the problem is serious and the health of banks may deteriorate further if the financial sector governance does not improve immediately.
"The indicator most often cited as reflecting the health of the banking system is the ratio of NPLs to total advances. The ratio of gross NPLs to gross advances jumped to 20 per cent at the end of June this year from December last year. The high share of NPLs not only a matter of concern for the banking sectors but also for the economy," added Dr Salehuddin Ahmed.
The volume of NPLs rose to Tk 89,340 crore as of June 30, 2018 from Tk 74,303 crore as of December 31 last, according to Bangladesh Bank.
"Lack of transparency and accountability of the bank's board and management in sanctioning loans, large loan irregularities and weakness of the regulator were mainly responsible for rising non-performing loans. Among all the banks, state-owned banks particularly performed poorly with large NPLs and bad governance," observed Dr Salehuddin Ahmed.
The former central bank governor further said that widespread irregularities took place in disbursing 'big loans' by both the public over in the last few years. These loans have become non-performing ones and thereby helped deteriorate asset quality of the respective banks finally eroding health of the banking sector.
"Loan irregularities first occurred in the public banks. But, now it is spreading in private banks as 'contagious' disease, which is a 'ominous' sign for the banking industry." said Dr Salehuddin Ahmed.     
"Despite loan irregularities minor actions were taken against the loan scammers and defaulters as they have influence in political circle as well as in the society," he added.
When asked, he said, "The governance in banks has not improved due to lack of the government's political will. Even, two amendments in the Banking Company Act have also undermined good governance in the sector."

More News For this Category

84 Rohingyas rescued in Cox`s Bazar from traffickers

84 Rohingyas rescued in Cox`s Bazar from traffickers

Staff Reporter :At least 84 Rohingya refugees were rescued on Saturday from traffickers in Cox's Bazar as they were waiting to board a fishing trawler to go to Malaysia.Of them,

Farmers, millers threaten to stop paddy production

Staff Reporter :Farmers and millers on Saturday urged the government to take measures that they get fair price of paddy.They gave the call at a press conference at Dhaka Reporters'

 Australian PM thanks voters for relecting him

Australian PM thanks voters for relecting him

Australian Prime Minister Scott Morrison has thanked voters for re-electing his centre-right Coalition in a shock result at the federal polls.He told supporters he had "always believed in miracles" as

Chhatra League leader cuts off man's fingers in Satkhira

UNB, Satkhira :A Chhatra League leader chopped off four fingers of a man's right hand in Kalaroa upazila on Friday over a land dispute, police and family members said.The victim

65 suspected doping-gang members held in city

Staff Reporter  :Detective Branch (DB) of Dhaka Metropolitan Police conducted separate drives in the city's New Market, Kuril, Wari, Uttara and Gulistan and  arrested at least 65 people on charge

JaPa opposes rice export

Jatiya Party acting Chairman and former commerce minister GM Quader on Saturday warned that exporting surplus rice may lead to food crisis in case of any natural disaster."Farmers aren't getting

Iran dismisses possibility of conflict with US

DUBAI (Reuters) :Iran's top diplomat on Saturday dismissed the possibility of war erupting in the region, saying Tehran did not want a conflict and that no country had the "illusion

'Hijacker' killed in N’ganj mass beating

UNB, Narayanganj :An alleged hijacker was killed while two others injured after receiving mass beating by angry mob in Fatullah on early Saturday.The deceased Sajib, 25, and the injured Mamun,

12 more killed in road crashes

12 more killed in road crashes

Staff Reporter :Reckless driving again takes lives on the roads and highways.  At least 12 persons including a college girl were killed and 40 others seriously injured in separate road

Bangladesh beat West Indies to win maiden title in multinational event

Bangladesh beat West Indies to win maiden title in multinational event

 Bangladesh national cricket team created history on Friday at Dublin winning their maiden title in a multinational cricketing event beating West Indies by five wickets.Bangladesh chased a target of 210