Finance Minister AMA Muhith does very often spring surprises with his caustic and, at times, frank comments. Some of his observations, on occasions, trigger controversies. That is why, the media people tend to follow him to get something interesting for their readers and viewers. In keeping with his characteristic, Mr. Muhith made last Thursday a candid admission about the irregularities and corruption in the state-owned banks and financial institutions, including, among others, Sonali Bank. Talking to journalists at his secretariat chamber, he said what has been happening in the state-owned banks (SoBs), is nothing but pure and simple theft (of money). Yet he expressed the government's inability to try the Sonali Bank's directors and outsiders, allegedly, involved in the Hall-Mark scam.
In fact, the country's banking sector was rocked by a number of high-profile loan scams in recent months, the one involving the Sonali Bank and the Hall-Mark Group being at the top. It is estimated that nearly Tk 100 billion have been siphoned off the state-owned banks (SoBs) in recent years. The outflow of a substantial amount of funds through fraudulent means, coupled with the presence of a high volume of classified loans, has put the SoBs in real difficulties, in terms of their respective capital base. At least two leading banks have requested the government to get them out of the woods. And the government has taken a lenient view and decided to foot the bill, by way of investments, for recapitalisation of these errant banks. The ministry of finance (MoF) has earmarked Tk 10 billion in the budget for the upcoming fiscal as 'investment for recapitalisation'.
Such recapitalisation of the SoBs, however, is nothing new. Factors such as mismanagement, inefficiency, corruption and government's interference in their day-to-day management and loan operations have been forcing these banks, time and again, to seek recapitalisation. The SoBs have been always easy targets of the loss-making state-owned enterprises (SoEs) and the dishonest section of private sector borrowers. The SoEs usually use the clout of the MoF over these banks to secure loans and, in most cases, default on repayment. The management of the banks very reluctantly makes available loans to the errant SoEs. But the situation is found to be different about disbursement of loans and their rescheduling, if and when needed, to the errant private sector borrowers who are seen crowding the SoBs for loans, despite the existence of a large number of private banks.
The question is: why should the MoF be so much tolerant of wrongdoings by the boards and management of the SoBs and other public sector financial institutions and make available public funds to keep them going. The banks should be asked to mobilise funds on their own from the market. They, as it happens in the case of their counterparts in the private sector, should give their officials and employees deposit mobilisation targets, promising incentives to better performers. There is no denying that salary and other fringe benefits of the officials of SoBs and other public sector financial institutions are unattractive, compared with those enjoyed by their counterparts in the private sector.
More importantly, the government has to think seriously about changing the way it has managed the operations of the SoBs and other public sector financial institutions so long as their owner. It should give up the habit of interfering in their affairs and allow the central bank to exercise its authority as the regulator over them as the latter does in the case of private sector ones. The MoF does also need to refrain itself from appointing incompetent and corrupt people on the boards of these banks under any political consideration since taking actions against these people, if found involved in wrongdoing, becomes difficult for understandable reasons. The Sonali Bank-Hall-Mark scam is a case in point.
