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Politics still plays havoc with banks

Economists at city dialogue demand JS debate on donor prescription

STAFF CORRESPONDENT
Politics is still responsible for the dismal performance of the banks and acts as a major problem for the economy, Prof. Wahiduddin Mahmud said yesterday.
Bank licences were given to persons of political choice who then herded other sponsor directors to float banks, he pointed out at a city dialogue.
Moreover, bank boards are not only inefficient but are also involved in taking illegal advantage.
"In some cases, young persons crowding the boards are not capable of running a business. This will not help improve the health of the banks and the situation should be changed," he felt.
Deteriorating ports, telecom and utility services will seriously dent real investment, he said, adding that high
cost of fund chokes private sector growth.
The spread between the deposit and lending rates is too high at around seven to eight per cent, Mahmud said, adding that interest rate deregulation in the hope of lowering fund cost did not work.
The International Chamber of Commerce-Bangladesh (ICC-B) organised the dialogue titled 'Financial Sector Reforms: Reflection on Recent Measures' at the conference hall of the Metropolitan Chamber of Commerce and Industry (MCCI). ICC-B President Mahbubur Rahman chaired the meet.
Bangladesh Bank Governor Dr Fakhruddin Ahmed attended the dialogue as chief guest while Professor Dr Wahiduddin Mahmud, chairman of the Financial Sector Reforms Committee, and Dr Debapriya, executive director of the Centre for Policy
Dialogue were present as special guests.
Economist Dr Debapriya Bhattacharya told the dialogue that donor prescriptions regarding financial sector reforms should be debated in the parliament as they did not bring any positive result.
"In many cases, the World Bank and the IMF's prescriptions were far from the reality. Still, they are never debated publicly," he told a city dialogue.
Local bodies like the Bangladesh Bank and the Bank Reforms Committee also have no less expertise than the donor specialists coming from Washington, he said.
Governor Fakhruddin Ahmed said a new law which would come into effect from May 1 would quicken settlement of default loans.
"In case of default loans, the
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banks would be able to exercise their authority to sell security or mortgages before going to the court. Let's see how it works," he added.
Debapriya said the government shut down the Adamjee Jute Mills, which had around 30,000 workers, but could not throw a single defaulter in jail.
Criticising the recommendations for privatising the Rupali and Agrani banks, he said steps should be taken to improve their management.
Mahbubur Rahman mentioned that the nationalised commercial banks (NCBs) have been rendered inefficient due to frequent interference by the finance ministry and other influential quarters in their management and loan decisions. The Bangladesh Bank has little role in the NCBs management.
High lending rate has been a major deterrent to the growth of trade and industry in Bangladesh. To help reduce
the rates, the central bank decreased bank rates from seven per cent to six per cent in 2001, but the banks failed to respond to the desired extent, he added.
The ICC-B president said insurance, leasing and other non-bank financial institutions also have their own problems. While initiating reforms, these sub-sectors should not be left out.
Barrister Rafique Ul Huq, senior advocate of the Supreme Court, said managing directors of banks should work with the judges to gain knowledge about banking laws.
M Aminuzzaman, managing director of the National Credit and Commerce Bank Ltd, criticised inclusion of army officials in bank boards.
Earlier, Dr Toufic A Choudhury, director of the Bangladesh Institute of Bank Management, presented a keynote paper at the dialogue.