Tuesday, 30 May, 2023

Tk 15.8b project for state-owned banks

The government has moved to modernise the state-owned banks to improve their efficiency and cyber security on the back of a slide in their performances.

A total of 11 state-owned banks will see upgrade under the ‘Modernisation of State-owned Financial Institutions’ scheme, which will be implemented at a cost of Tk 1,580 crore, Planning Commission sources said.The scheme will help the state-owned banks enhance their efficiency in the area of risk management, financial transaction, internal control and audit, automation, and credit monitoring and management.

At the same time, the project will focus on ICT skills and capabilities to rein in cyber risks at the banks.

The Bank and Financial institutions Division (BFID) of the finance ministry will implement the scheme in all branches of the state-run banks across the country by 2021.  

With the initiative, the government seeks to ensure good governance in all activities of these banks, improve their institutional skills and strengthen BFID’s oversight system.

The scheme will facilitate business process re-engineering of the state-run banks, help improve IT infrastructure and cyber security systems of all the state commercial and developmental banks alongside improving corporate governance structures of the banks.

It will provide consultancy support to state-owned banks for a comprehensive business process re-engineering (BPR) from internal control and accounting to credit appraisal system, risk management, and transaction processing, which is a prerequisite for an automated modern banking environment.

Out of the total estimated project cost, the government will provide Tk 395 crore and Tk 1,185 crore will come as project assistance from the World Bank.     

The WB has approved the project and Economic Relations Division (ERD) has already signed a loan agreement with the multilateral lender for $150 million IDA assistance for the project waiting for GoB approval.  

Under the scheme, Tk 608.30 crore will be spent on procuring ICT equipment for automation and cyber security for 11 banks. And collecting software for the equipment will require another Tk 497.70 crore.

The Planning Commission will place the project this week before the Executive Committee of National Economic Council (ECNEC) for final approval,

The state-owned banks in Bangladesh serve an important function of credit provision, employment generation, and financial inclusion to the underserved segments of the market, including SMEs, agriculture clients, and youth.

However, the balance sheets of the banks are still weak—a consequence of the enduring impact of a series of financial scams and resultant loan defaults in the state banks.

The ease of access to finance in Bangladesh is constrained in part due to the inefficiencies of state banks which own about 56 percent of total bank branches and have the deepest branch penetration across the country, including remote areas and villages.