Bank-Insurance
Bangladesh’s Banking Sector Grapples with Unprecedented Losses of Tk 92,261cr
A recent assessment by the Centre for Policy Dialogue (CPD) sheds light on the alarming state of Bangladesh’s banking sector, revealing a staggering amount of Tk92,261 crore stolen through 24 major scams since the fiscal year 2008-09. CPD Executive Director Fahmida Khatun disclosed this unsettling figure during a press briefing on December 23, cautioning that the total loss might surge even higher if smaller irregularities, such as loan write-offs, rescheduling, and court stays, were considered. Khatun emphasized the three-and-a-half-fold surge in loan defaults since 2012, attributing it to various irregularities.
The consequences of these defaults are reverberating through both public and private banks, exacerbating liquidity crises and escalating provision deficits. Dr. Fahmida pointed to a worrying trend in the overall banking system, particularly highlighting concerns in state-owned banks, particularly the specialized banks.
She criticized the central bank’s role in safeguarding public funds, citing weak policy measures influenced by beneficiaries. Dr. Fahmida expressed concerns about the increasing influence of a consolidated group in controlling the country’s banking sector. The impact of attempts to control inflation through increased bank interest rates has been negligible, leading Dr. Fahmida to propose reinforcing the Competition Commission and calling for heightened monitoring of syndicates.
During the press conference, Professor Mustafizur Rahman, a distinguished fellow of CPD, emphasized the heightened risks in the current state of the economy. He drew attention to the substantial transfer of wealth from the poor to the rich due to excessive inflation and proposed coordinated measures involving interest rates and exchange rates.
In terms of income inequality, Rahman highlighted a drastic increase in the wealth gap, urging the importance of tax collection to ensure fairness in distribution. However, he expressed concern about the lack of improvement in revenue collection, warning against a situation where the entire income is spent on revenue expenditure, making development entirely dependent on loans.
In conclusion, the CPD researchers called for a shift in focus from taking loans for new large-scale infrastructures to advancing current projects and profitably managing existing infrastructures.
In light of the current situation, Bangladesh Bank has mandated that all banks and financial institutions refrain from charging additional fees for late payments of credit card bills and loan installments.
The central bank issued this directive through two separate notifications on Wednesday, providing a significant relief measure to the financially burdened.
Borrowers and credit card holders who were required to make payments during the curfew and public holidays now have until July 31 to settle their dues. Bangladesh Bank has explicitly stated that banks and financial institutions are prohibited from imposing any extra interest, penalties, or late fees for installments or credit card bills due between July 18 and 25. Furthermore, no savings schemes shall be canceled for non-payment of installments during this period.
The central bank’s notification acknowledges that many borrowers and credit card users have struggled to meet their payment deadlines due to the prevailing circumstances.
Additionally, numerous depositors have been unable to make timely deposits into various savings schemes, including the Deposit Pension Scheme (DPS). To address these challenges, the new guidelines will be in effect from July 18 to 25, covering dues on loans, credit card bills, and savings scheme installments.
According to the directive, if the outstanding loan and credit card payments are settled by July 31, any accrued interest, penalty interest, additional interest, excess profit, or late fees will be waived. Similarly, if savings scheme installments are paid by July 31, no late fees or penalties will be imposed.
Moreover, any interest, penalty, or late fee already collected on loans, credit cards, or savings schemes must be refunded or adjusted, as per the Bangladesh Bank directive.
The Bangladesh Bank (BB) has announced an extension for the payment period against imports of industrial raw materials from 180 to 360 days, a measure now set to remain in place until December 2024. This policy, initially scheduled to end in June of this year, has been prolonged to facilitate trade transactions, according to a BB circular issued today.
“To support trade transactions, it has been decided to extend the policy support until December 31, 2024. The extended usance period will not apply to imports under EDF loans, as previously stipulated. All other relevant instructions remain unchanged,” the circular stated.
To ensure timely payment of salaries and bonuses to garment industry workers before Eid-ul-Azha, the branches of banks in key industrial areas will remain open on a limited basis on June 14, 15, and 16.
The Bangladesh Bank (BB) issued a notification stating that bank branches in Dhaka metropolitan, Ashulia, Tongi, Gazipur, Savar, Bhaluka, and Narayanganj will operate on these days to facilitate financial transactions for garment sector employees.
Typically, Friday and Saturday (June 14 and 15) are weekly holidays, and Sunday (June 16) will be closed for Eid. Despite these closures, the BB has mandated that banks in industrial regions stay open to manage the disbursement of wages and bonuses and facilitate the sale of export bills.
Additionally, bank branches in Chattogram metropolitan and industrial areas will also be open to support garment workers’ payments and the processing of export bills.
The BB has instructed banks to coordinate with local authorities to ensure adequate security at the branches during this period.
Eid-ul-Azha, one of the most significant religious festivals for Muslims, will be celebrated in Bangladesh on June 17.
