Mismanagement in the Banking Sector and the Discrepancy in Directors' Loans: An Analysis

The banking sector of the country has suffered immense mismanagement under the previous government's rule. A recent report from the White Paper Committee highlights the role of some bank directors in driving this sector towards destruction. Allegations include taking loans under fictitious names, money laundering abroad, and exerting influence to change ownership of banks.

Loans and Defaults by Directors  

According to data from Bangladesh Bank, the amount of loans taken by bank directors as of August 20 stood at approximately 2.34 trillion taka. In 2016, this figure was around 900 billion taka, meaning the amount has increased by 160% in eight years. Of these loans, the defaulted amount by directors is around 75.7 billion taka, primarily from state-owned and some private banks.

Leading Private Banks in Loan Disbursement  

Among the private banks, the directors of Islami Bank stand out for taking the most loans, amounting to 27 thousand crore taka. The loans from Pubali Bank and the state-owned Janata Bank are 17 thousand crore taka and 13.5 thousand crore taka, respectively.

Unethical Practices by Directors  

A prevalent trend is the directors taking loans under fictitious names. They have opened shell companies under the names of relatives, employees, and even personal assistants, borrowing large amounts of money. Due to restrictions on borrowing from their own banks, they have resorted to collusion with directors from other banks to acquire significant loans.

Actual Situation of Defaulted Loans  

Economists believe that the actual amount of loans under the names of directors could be even higher. It is estimated that the total loans, including those taken through shell companies, could exceed 5 trillion taka.

Administrative Measures and Necessity  

Although Bangladesh Bank has taken several measures to curb these irregularities, effective remedies have been hindered by the weakness in the legal framework. Experts argue that reforms are necessary in the Bank Companies Act to prevent such abuses by directors.

The Way Forward  

An analysis of the current situation reveals that restoring good governance in the banking sector will require not only legal reforms but also a complete overhaul of management boards. Strict actions against the corrupt and ensuring transparency in bank management will be the only way to overcome this crisis.

Conclusion