• Friday, Sep 30, 2022
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Loss-making state-owned banks should be privatised

  • Published at 06:00 pm September 24th, 2016
Loss-making state-owned banks should be privatised

The latest Bangladesh Bank data reveals an alarming trend: The number of loss-making branches of six state-owned banks has doubled at the end of the 2015-2016 fiscal year from the same time in the previous year.

The loss-makers -- Sonali Bank, Rupali Bank, Agrani Bank, Janata Bank, BASIC Bank, and Bangladesh Development Bank -- increased their expenditure but earned less in the past year. Four of them opened up many new branches while making massive losses.

This is unacceptable: The coddling of state-owned banks needs to stop.

It has been seen repeatedly that the central bank has been unable to properly manage the state-owned banks and rein in their losses.

SOBs have inadequate capital to manage their losses on bad loads, but continue to flout rules that guard against undue risks. Their loan approval processes are often fraught with major irregularities. There are records of a particular SOB breaching the law restricting the loaning of more than 25% of the bank’s capital to a single group or individual.

It is high time that alternatives were considered in order to stop propping up these highly inefficient institutions while wasting money from the public coffers. There are many better ways to spend tax-payer money, like education and health, rather than help banks with proven track records of failure.

Private banks have demonstrated greater efficiency, and are also free from the political influence and corruption that plague state banks.

State banks, on the other hand, have not shown the ability or the willingness to reform.

It is time to cut the cord and privatise these state-owned banks.

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