Two new banks in an ailing banking sector

Update:

Nine new private sector banks were given approval in 2009, sidestepping objections of the central bank. With an exception of two or three of those banks, the rest have become symbols of an undisciplined banking sector. Some banks simply ignore the rules and regulations. No initiative is being taking to rectify the situation. On the contrary, the finance ministry is giving permission to two new private banks.

We cannot out rule out the possibility that these banks have the potential of being models in management. But then, nor can we rule out that these may become ailing and insolvent financial institutions. The government must certainly support honest bankers and banking. But presently the government’s uncalled-for and unwanted interference is spreading its tentacles throughout the banking sector. Meanwhile the central Bangladesh Bank’s reputation has become tarnished. There are no signs of its management improving in any way. No action is being taken against those facing plausible allegations. A downturn of ethics in the central bank will no doubt have an adverse impact on the banking sector as a whole and deteriorate further the prevailing sick competition.

In 2009 Bangladesh Bank had said there was no scope to open any new bank in the country. Even so, in keeping with narrow political interests, nine new private banks were floated, posing as a threat to a healthy banking sector. Recently seriously irregularities and violations of banking rules were exposed in one of these nine banks, but the government has turned a blind eye.

The banking sector is the most sensitive driving force in a country’s financial sector. Lack of discipline in the banking sector affects all other sectors. We hope credible transparency is followed in approving the new banks. Unless the disorder of the banking sector is dispelled, even sincerest efforts to establish new banks will remain at risk.

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