Transparency International Bangladesh (TIB) has recommended establishing an independent banking commission comprised of experts in the banking sector to establish good governance and secure banking system.
The think tank also suggested implementing 10 points to bring in transparency and security to the banking sector in the best interest of the country’s economy.The recommendations came on Tuesday at a virtual press conference titled “Banking Sector Supervision and Regulating Defaulted Loan: Challenges of Good Governance of Bangladesh Bank and Ways to Overcome It.”
Speaking on the occasion TIB Executive Director Iftekharuzzaman said Bangladesh Bank failed to play its due role in terms of managing defaulted loans in the country’s banking system.
On average, Tk95 billion loans have turned default every year for a decade due to massive irregularities and the lackluster role of the central bank, he said, adding that the sector has gone to the brink of collapse.
TIB Director, Research and Policy, Mohammad Rafiqul Hassan presented a research paper on the topic where he mentioned that default loans would reach around Tk3 trillion if the write-offs were included.
The 10-point recommendations that TIB makes are as follows:
1. An independent banking commission comprising experts needs to be set up to reform the banking sector, which is plagued by default loans and massive irregularities.2. By amending sections 46 and 47 of the Banking Companies Act, 1991, Bangladesh Bank should be given full authority to control and supervise the state-owned banks.
3. To make a specific written policy regarding appointment and removal of board members, governors and deputy governors of Bangladesh Bank.
4. The number of private representatives (concerned experts in financial sector and good governance) should be increased in place of three government officials on the board of directors of Bangladesh Bank.
5. All the sections in the banking-related laws which are against the interest of the depositors and conducive to the establishment of family system in the banking sector should be amended / repealed.
6. A panel should be formed through a search committee to appoint directors of all commercial banks, including state-owned banks. A provision should be made to prevent persons directly involved in politics from becoming bank directors and loans to bank directors should be approved through direct supervision of Bangladesh Bank.
7. A policy should be made to keep provision against defaulted loans suspended by the court.
8. A list of repeatedly rescheduling and restructuring of loans has to be made and published.
9. Increase the number of bank inspectors by filling up vacancies and the departments directly involved in inspection work should be filled immediately.
10. Exemplary punishment should be ensured against those involved in irregularities and corruption in the preparation and implementation of investigation reports.