The finance minister said late last week in Dhaka that steps would be taken for offloading shares of the three state-owned commercial banks (SCBs), namely, the Sonali Bank, the Janata Bank and the Agrani Bank to ensure private partnership in equity of these banks. The minister did not elaborate the partial divestment plan for the banks but said the offloading of shares of these banks would begin during the tenure of the incumbent government. The broad hint given by the finance minister is, of course, a departure from an earlier, apparent rigid stance of the government on the divestment, partial or otherwise, of the SCBs.
However, the circles concerned have a strong doubt about the bona fide of the government's move to unload stocks of the SCBs. The move, they feel, if it is initiated at all, will be due to extraneous pressures. No matter how poor their performance vis-à-vis the private banks have been and no matter how big loan scandals have dented their image, the government has always been lenient towards the errant SCBs. But it has reasons to be so. These banks have been most handy instruments for monetisation of the fiscal deficits that the government encounters frequently and also for providing financial support to the loss-making parastatals, notwithstanding their endemic loan default practices. The SCBs have also their branch network spread up to the rural areas. Giving up control over them would cause severe problems for the government.
The creation of the banking and financial institutions division (BFID) in the ministry of finance in 2009 was aimed at keeping control over the SCBs. Reforms in the banking and financial sector carried over time had diluted, to some extent, the controlling authority of the government over these public sector banks. The BFID was installed to regain full authority which is, allegedly, abused at times undermining the public image of such financial institutions that once dominated the country's banking sector. Moreover, such interference heightens mismanagement and financial irregularities in the SCBs further. More importantly, the BFID does not itself have qualified manpower and logistics to oversee activities of the SCBs.
It is imperative to ensure representation of the private sector people on the board of directors of the SCBs through, at least, partial divestment of these organisations. However, the divestment, to the extent of only 5.0 to 6.0 per cent of their equity capital -- the way it has been carried out in the case of Rupali Bank -- would hardly have any impact on their operational performance. There has to be a respectable level of private sector representation to help infuse dynamism in the operation and management of these banks. There is no denying that under the given ground realities in Bangladesh, the government should have a decisive control over the SCBs for some more time.
For example, the SCBs have their respective network in the furthest corners of the country where the private and foreign banks would not go since they are basically risk-averse. For the sake of the rural economy and financial inclusion, the presence of banks in economically important places in the rural areas is very much a necessity. But the presence of a few private sector people on their boards is unlikely to stop the banks from doing their good job in the rural areas. It might rather help ensure a modicum of transparency and accountability on the part of the management of the SCBs.
Source: The Financial Express
