The government owns quite a large number of errant organisations operating in different sectors of the economy and it has been paying a heavy price for running these establishments. Since the early '80s, the government has disposed of a good number of such entities but many more do still remain under its ownership as no decisive step has so far been taken for their divestment. The loss that these entities incur every year does come as an embarrassment to the government. Yet the government tends to carry on with the same. Of late, the state-owned commercial banks (SoCBs) have been creating enough troubles, in terms of their performance. The government is required to earmark a sizeable amount of fund in the annual national budget, as and when required, for recapitalisation of such banks.
But a couple of financial scams involving the SoCBs have caused enough of discomfiture to the government. And the government does not have much scope for shifting the blame on to others since the scams were, directly or indirectly, linked to its own decisions on the management affairs of the state-owned commercial and specialised banks. This is an area where the government is unwilling to give up its control. Recently, the ministry of finance (MoF) has, albeit reluctantly, ceded some of its power to the central bank in the case of taking actions against the managing directors of the SoCBs. But it has retained its full control over the appointment and removal of the directors to their respective boards. But an inappropriate exercise of that authority in the case of appointment of the directors has often invited troubles for both the banks concerned and the government.
The latest case in point is the suspension of the corporate social responsibility (CSR)-related activities of four SoCBs for alleged abuse of authority by a section of their directors. Such directors allegedly manage allocation of large sums of money against a number of CSR activities, causing a negative impact on capital adequacy of the banks concerned and their overall capacity for provisioning requirements. The CSR programmes are reportedly taken up in the localities of some of the directors with a view to earning personally 'name and fame' at the cost of the banks. The move to become 'philanthropist' on the part of the SoCB directors in their respective localities could be guided by political motives.
However, political motives among a section of the directors appointed by the government under political consideration should be considered a natural phenomenon. The government should have been duly careful while selecting such directors for the state-owned commercial and other specialised banks. The scams involving the largest of the SoCBs, the Sonali Bank, and also of the BASIC Bank do underscore the importance of this. The scams of such an unprecedented scale in the country's banking history have caused substantial damage to both strength and reputation of the banking sector. The government, in the face of widespread criticism, has reorganised the board of directors of the BASIC Bank. But the alleged irregularities involving the CSR programmes do highlight the need for initiating identical measures for other SoCBs. Moreover, the MoF should request the central bank to launch a probe into the spending on CSR-related activities by the SoCBs for the money spent does belong to the depositors.
