‘Culture of default loans will destroy banking sector’

A culture of default loans in Bangladesh’s banking sector has concentrated people’s entrusted money into the hands of a few bad people, putting the entire sector in risk, speakers at a regional banking conference have said. Several banks were already in a precarious state and this could bring the banking sector to the brink of a crisis, they said, and called on the central bank and the government to take a zero-tolerance approach on non-performing loans (NPL). They were speaking at a session titled “Country paper presentation on banking” at the Regional Banking Conference 2018 that launched in Dhaka on Sunday. Regional Banking Conference 2018 is jointly organized by Bangladesh Institute of Bank Management (BIBM); Financial Institutions Training Institute (FITI) of Bhutan; National Institute of Bank Management (NIBM) of India; and National Banking Institute (NBI) of Nepal. The session was chaired by former Bangladesh Bank governor Dr Mohammed Farashuddin, Dhaka University Business Studies faculty dean Prof Shibli Rubayat Ul Islam, chief economist of Bangladesh Bank Dr Faisal Ahmed, BIBM Supernumerary Prof Md Yasin Ali, Managing Director and CEO of Dhaka Bank Limited Syed Mahbubur Rahman. A comparison of the four participating countries shows that Bangladesh had the greatest ratio of NPLs while Nepal had the lowest. Farashuddin praised Nepal’s regulatory authorities for their success in controlling NPLs. Prof  Md Yasin Ali said default loans were the biggest problem of the banking sector, which was making everyone suffer. “In India, wilful defaulters are named publicly in a list, but no such effort is seen in Bangladesh,” he said. “At the same time, in the name of loan restructuring, 10 businesses were given Tk15,000 crore. They have defaulted on these loans as well,” he added. Syed Mahbubur Rahman said good governance and accountability are a must if the government wants to protect the banking sector. “Bangladesh Bank will have to create a level-playing field for all banks.” Prof Shibli Rubayat said Bhutan and Nepal are performing well in banking and can be examples for Bangladesh. “Bhutan has a balanced disbursement of credit, while Nepal has very low NPL,” he said. “On the other hand, you can tell how we are doing by looking at the six state-owned banks,” he added. Pointing to the growing interest rates, the speakers said this is alarming, as interest rates are already high in comparison to neighbouring countries. They called for immediate solution to this crisis. Bangladesh Bank Governor Fazle Kabir inaugurated the conference chaired by BIBM Director General Dr Toufic Ahmad Choudhury. Fazle Kabir said: “The banking industry needs a collective effort of academicians, researchers and practitioners to cope up with the global banking environment of growing competition and challenges. The nature of development and challenges of banking sectors of our neighbouring countries are not widely different. Therefore, I am confident that the platform will facilitate us to learn from each other in identifying and tackling our specific challenges.” “As you all know, banking cannot be confined within the boundary of a country. Most often, we are to transact across the border. Besides, banking industry of a country is very responsive to the socio-political-economic situation of other countries,” he added. The Regional Banking Conference 2018 is being hosted at the BIBM campus in Mirpur, Dhaka and will conclude today.