Loan Default Monopoly
It is not much of a revelation that industrial loans are monopolised by 87 business families in the country. Nor are we surprised that the nationalised commercial banks (NCBs) and development financing institutions (DFIs) remain captive to the so-called industrial houses to dodge repayment of long overdue loans. How badly has this incapacitated the banking system is also a much known fact. But what certainly strikes as a startling revelation is the steep regression in the default scenario observed not before but after the reform measures had been put in place! We have it on the authority of Bangladesh Bank Deputy Governor Khondker Ibrahim Khaled that after five years of reform classified loans with NCBs and private commercial banks stood at 34 per cent and 43 per cent respectively of their loan portfolios in 1995 as compared to 29 per cent and 25 per cent in 1990.
There has been reform in the structure and functions of the boards of directors on the banks after 31st December, 1995 when the above statistics were compiled. Bangladesh Bank Deputy Governor would have done well if he had given some latest figures to provide an idea as to what impact the AL government-led reorganisation of the banks' board of directors has had on the default culture.
The seminar on industrial loans organised by Bangladesh Young Economists' Association and Bangladesh Institution of Administration and Management breathed some freshness into the issue as the key paper was read by a non-resident Bangladeshi economist, named Ziaul Hoque. He made two points with savvy: government's policy intervention and flawed borrower screening mechanism 'allowed concentration of bank loans in few hands.' The harder truth, however, is banks have traditionally been either a hunting ground for plundering depositors' money or for an extension of political patrimony by powers that be. The default loan is but a manifestation of crony culture in which several officials of the banks abetted reaping huge personal gratification, something which the task force on banking reform has recently underscored.
Close to elections, the tendency to favour supporters with bank loans had been commonly observed in the past. The AL government has to break this pattern. Apart from strict enforcement of laws against wilful big 'defaulters', we need to build conditions in which they feel socially unwanted. Let's also firm up the electoral laws so that those who commit breach of public trust cannot get elected to representative positions.
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