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BANKING SECTOR IN SPOTLIGHT

Business is increasingly taking control over politics

Faruque Ahmed
Banking system is under severe pressure from many sides. Finance Minister AFM Mustafa Kamal is changing the loan rescheduling system to largely benefit big defaulters that will virtually slow down loan recovery process.
Commerce Minister TipuMunshion Thursday last charged banks saying their big margin between deposit rates and lending rates is in fact like committingdecoity or plundering borrowers. He said big margin such as about five percent in Bangladesh is an obstacle to private sector growth. This is not more than two percent in advanced economies. He said high rate of interest on lending is the main cause of huge loan defaults in the country’s banking system.
Now over 10 percent of total bank credit or over Tk 93,000 crore is classified loan and half of it is bad loan to mean that practically these are not recoverable. No need to mention that big defaulters are mainly big business houses and they are now using their influence and control over the political system to curve out a liberal loan recovery process.
The finance minister and the commerce minister are the ones to benefit from new rules. Finance minister made no secret that on taking over office he was worried over the astounding rise in default loans and the new rules aimed at putting a cap on it artificially.
One can clearly see that the character of the country’s politics and direction of the state are rapidly changing track. Businessmen are in growing control over the political system along with handful of retired bureaucrats who get involved in party politics while in service and later became politicians overnight.
The role of the real politicians is clearly on decline and distinctly downgraded now as the country’s democratic system is shrinking and being held hostage by an emerging class of opportunists dominated by big business, retired servicemen and oligarchs. In other words new political leadership is not emerging in absence of our failing democratic process.Hoodlum control politics. The vacuum has been increasingly filled by people having no link with the common masses.
In one estimate over 70 percent MPs are now businessmen and many of them are rice millers, owners of garment factories or other big businesses. Needless to mention that most of them are big bank loan defaulters. Many have laundered banks and financial institutions and yet they are not barred from contesting elections to become MPS, ministers or advisers of the government.
The country has ArthaRinAdalat and Bankruptcy law to deal with delinquent defaulters who are avoiding loan repayment on the ground that their business has become sick business orinvestment has failed. In most cases they have moved out fund abroad to buy real estate or running other businesses with the money taken from banks.
Court can indeed attach property. Thy can be stripped of voting right and barred from contesting in election. But politics is the number one instrument in the hands of many of those defaulters to hold control of the state power and continue to grab bank money.The finance minister has said he can’t put big businessmen to jail, because the economy will suffer.
The new rescheduling system has created a class of ‘honest defaulters’ to avail of loan repayment at 9 percent interest at two percent down payment. The so-called honest defaulters now tends to create a new group of ‘dishonest defaulters’ who seem to be slowing down regular loan repayment at 11 to 12 percent interest to avail of lower interest at 9 percent and such other benefits reserved for state recognized defaulters under the new package.
It is clear that businessmen now at the helm of state power are reversing the critical banking standard to their advantage while the nations witnesses it as helpless spectators.
Many wonder whether banking rules can be so easily changed without soliciting greater opinion of bankers at stake, public leaders; national think tanks and on top of it taking the issue for debate in parliament. If the recommendations of a committee is enough headed by a chairman of a state owned bank. What was more surprising is that the finance minister at first announced bank interest at 7 percent under the new rescheduling package and one week later refixed it at 9 percent. People don’t understand whether the finance minister is all powerful to bring all such changes.
His decisions appears highly biased to big business. None of these decisions are so easy like blanket offering of the new package to all defaulters for long 12 years. Even those enjoying such benefits under an earlier rescheduling package will be eligible to enjoy benefit under the new package. One can also recall a special clause which allows defaulters to invoke ‘internal and external factors’ for business failure to avail of new rescheduling benefits.
BASIC Bank defaulters who have laundered almost the entire cash of the bank over several years under the protection of the bank chairman have been rather treated more liberally instead of making the call to put them on trial for destroying the bank.
When the commerce minister says banks are charging huge margin on borrowers, especially businessmen one can initially agree with the minister’s assertion. Such big margin is not allowing banks to reduce lending rate to single digit so important for the economy and businessmen are demanding over the years.
But why such big margin banks are charging also can’t be ignored.It is part of a provisioning system against bad loans so that banks can make good some of the losses this way. Had there been fewer defaults, the margin also could have been lower.
But we have arrived at a time now when big defaulters are looking for ways to avoid repaying overdue loans spilling over to almost one hundred thousand crore taka causing huge liquidity crisis in banks, particularly in state owned banks. How banks will survive is the big question. Businessmen are borrowers in one hand and as public leaders they are also curving out new rules on the other that will allow them to avoid loan repayment for pretty good time.
Banks have been also asked, mainly state owned banks to frequently write off old loans while most default loans of today may also come for write off this way some time in future. In fact all state owned banks are surviving now on the government special bailout programmefrom annual budgetary allocation of tax payers’ money.
Many big businesses have laundered most funds of public banks like Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Krishi Bank. The government bailout is just saving them collapsing. Otherwise this will be suicidal politically to the government.
Many are taking this advantage to launder banks. They use fake collateral in most cases.Hall-Mark is one such case. Crescent Group, Bismilalh Group and such other business houses have systematically laundered banks pushing them to the brink.
It appears that big people are making banks empty and the government is refurbishing funds to those banks from tax payers’ moneythus indirectly making way forpowerful people to amass illegal wealth.
About 1500 families now control the country’s private banks and financial institutions. They have been able to change banking laws making those banks their family business to collect deposit from across the country. Directors of those banks are exploiting their position misusing loans. Farmers Bank is one such example which collapsed recently for massive misuse of loans.
The chairman, an influential ruling party leaders made good harvest from the bank as taka 300 to 400 crore loan disappeared from recoverable track. The government has bailed out the banks but the loan recovery remains illusive.
It is not good for the state that pro-people politics is disappearing as the democratic system is falling apart. Big business is now taking control over the state which is causing big damage to public institutions and particularly to election system to continue their control on state power and national wealth. People have the power to change the system but powerless to string the gun.

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