How to sustain govt banks
In the middle of mounting irregularities and corruption, the government is seriously thinking about materializing certain initiatives to ensure good governance and accountability in the state-owned banks.
Banking sources have informed that Financial Institutions Division has started working in light of twenty seven recommended ways to rescue the state-run banks from different forms of critical drawbacks. These recommendations include establishment of accountability among bankers and loan defaulters.
Finance Minister AMA Muhith unveiled a list of top 100 loan defaulting individuals and organizations last year in the Parliament. The list included only two persons and all other names on it were business enterprises. Allegedly the most infamous loan scammers were not named on that list by AMA Muhith.
Most of the state-owned banks have dipped into unfathomable pitfalls with unrestrained corruption, anomalies and enormous sums of loans disbursed to different organizations which have been defaulted.
Several economic scholars have frequently called upon the government to crack down hard on financial culprits to save banks from devastation. Finance Minister AMA Muhith and Bangladesh Bank's Governor Fazle Kabir have faced severe criticism too over the irregularities and graft across banks.
The recommendations to recuperate banks include setting up monitoring cells in each bank as well as in Bangladesh Bank to keep sharp eyes on the loan recovery process which involves 100 crore taka or more defaulted loans.
Economists who have presented these recommendations have also urged Finance Ministry and Bangladesh Bank to thoroughly examine the performance of loan recovery units of different banks every three months to check out whether the concerned officials are doing their work in the right way or not. The success and failures of the bankers should be stated in their annual confidential reports (ACR), the recommendations have added.
It has been recommended to assign certain loan recovery targets to the Managing Directors and Chief Executive Officers of the state-run commercial banks and to pay their incentives and bonuses on the basis of their capability to reach those targets. Rewards for successful loan recovery and penalties for failure to do so have been recommended too.
The academic qualifications, backgrounds and professional expertise of applicants should be precisely and neutrally scrutinized before putting them in the boards of directors of state-run banks. It has been recommended to formulate particular guidelines in light of the existing laws when it comes to unification of banks and transforming the state-owned banks into corporate firms.
The existing loan approval system should be reviewed while the recommendations include endorsing and processing loan proposals at maximum three stages. It has been also recommended to set up a central database to prevent the forgery of mortgage documents.
Bangladesh Bank has been suggested by these recommendations to exercise higher vigilance in case of non-funded loan facilities like loan against trust receipt (LTR) or bill purchase. Bangladesh Bank can consider revising the existing regulations for provision of working capital at the time of evaluating loan proposals.
Moreover, it has been recommended to establish electronic bank accounts for storing detailed facts and figures under 'know your customer' (KYC) program. Enlistment and assessment of credit rating agencies need to be conducted objectively for proper evaluation of mortgaged properties.
Professional skills of employees of all state-owned banks should be improved to aptly implement loan disbursement regulations, internal audit and to firmly control the loan delivery system. According to the recommendations, the internal audit team should be allowed to work independently without influence from top management.
Bangladesh Bank's former Governor Dr. Salehuddin Ahmed has said that the list of loan defaulters as well as the list of the clients who pay back loans on time both should be exposed.
The good list would encourage people to comply with banking rules, he further said. Dr. Salehuddin Ahmed laid emphasis on halting political influence on state-owned banks. He also urged banks to take special care of the lawsuits over bank loans for rapid settlement of these cases.
On the other hand, Finance State Minister MA Mannan has said that tough measures should be initiated against the clients who default loans whimsically. However, he added that banks should not do anything which might defame someone.
Source: https://dailyasianage.com
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