Observers to sick banks | The Daily Star
12:00 AM, November 20, 2015 / LAST MODIFIED: 12:00 AM, November 20, 2015

Editorial

Observers to sick banks

They should be more than that

In a bid to halt the increase in non-performing loans (NPL) in four state-owned banks (SoBs) -- Sonali, Janata, Rupali and Agrani -- Bangladesh Bank (BB) has decided to appoint advisors to the ailing financial institutions. A look at the financial statements of these banks is enough to catch everyone's attention. As of June 30, NPL stood slightly over 26 percent. In laymen's terms more than Tk 1 out of Tk 4 given out in loans goes bad or is not repaid. Every year for the last few years, the ministry of finance has had to bail out these SoBs. 

Weak internal controls in terms of audits and archaic operating methods where automation has not seen the light of day and lack of professionalism have contributed to the ever rising bad debt. We understand that things have gotten to the point where new branches of these banks are on hold until they do some serious revamping and come out of the “red” in terms of performance on loan recovery. The series of high profile loan scams that rocked the financial sector a few years ago came from SoBs.  

The decision to appoint advisors is a welcome move, but they should be more than mere observers. We do not know what exactly their terms of reference would be, but it is a good move and they should be empowered to act in all manners to protect the interest of all stakeholders, depositors in particular. Otherwise, the initiative, no matter how well intentioned, will merely be anot her round of window dressing. 

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