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Commentary

Saifur offers new ideas for saving sick industries

by S M Ali
Whether H was only a pass tag thought or a serious pro position, the call by Finance Minister M Saifur Rahman to bank executive* on Sunday to evolve a participatory system with clients replacing the existing collateral based lending procedure has raised a few questions and sonic serious :X"'“ in the financial
The finance Minister made this suggestion while addressing aentormost officials of all different commercial banks and development financial institutions. Also present at the meeting were some minis tecs, departmental secretaries, heads of public sector corporations and the Bangladesh Bank Governor
This was hardly the kind of conference where the FinarA-c Minister could make ofT-the-cuff remarks about what banks could do for "revitalising the non-performing industrial units in the country.' the main theme of his address.
According to the agency report. the minister "instructed the bankers to provide work Ing capitals and Inject" funds for "non-performing" industrial units. Here, some bankers as sume that the so-called nonperforming units would generally mean or include "losing concerns."
As one expert puls it. "In using the funds which belong
to our depositors, not to the banka as such, we must look at the viability of the project. Here, we must go on case by case basis and avoid all possible risks of sinking money tn a losing concern."
"This is what financial dis ctpltne which so many banks violated tn recent past Is all about." he adds.
Rahman s suggestion that banks should adopt a participatory system with clients re placing the prevailing collateral-based lending procedure has caused more serious concern.
The ministers suggestion has been taken to mean that banks should take up equity participation tn industrial concerns. a system favoured by some Arab-backed Institutions. In reality, this would make it essential for the banks to sit on the boards of industrial concerns and be involved in their management.
"We cannot go that far tn helping our Industries." says a noted banker, "we are lenders of funds, not investors."
There is also considerable opposition to the idea that banks should move away from the existing collateral-based lending procedure.
In the past, during the Era had regime, too many massive loans were advanced on the basis of political signals, with too little attention paid
to collaterals or securities. This resulted tn the accumulation of bad debts for many banks which today face tricky legal situations to recover their dues.
Says a banker. What is Im portant is to tighten the collateral system, not to weaken it. At the same time, we should make it legally easier for banks to recover their bad debts."
Unless these steps are taken, we must regard even many of our banks and financial institutions as "sick industries", far from fully capable of helping other sick industries. So. Rahman's plea to banks "to reactivate at least 100 industrial units by December next" (perhaps meaning within four months) suggests too ambitious a target, according to bankers.
However, on balance, there Is much appreciation in the banking community as well as in trade circles for the Finance Minister's Interest In the re-habtlitatldn of the so-called sick Industries
As one expert puts It. "Some of hts suggestions may raise questions, but Rahman involves professional people in open debates, which is seldom practised by other members of the cabinet. "
The expert may well be speaking for members of various professions, and, Indeed, for The Daily Star.