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Banks will have to
bear responsibility for default loans, says Kibria |
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March
11, 2000 Finance
minister SAMS Kibria Friday hinted that the managements of banks would
come under strict discipline and has to bear a lion’s share of
responsibilities in case of default loans. “About
40 percent of bad loans are related to commercial lending and many of
these happened in connivance with bank officials,” said the finance
minister while speaking at a roundtable conference Friday on Discipline in
Banking Sector. The
conference that brought bankers, experts, policy makers, academicians and
researcher together identified a huge volume of classified loans, undue
political pressure, interference onboard of directors, lack of strict and
proper enforcement of rules and regulation as some of the major
constraints as some of the major constraints hindering development of the
banking sector. Organized
by the daily Arthanitee, t he conference was addressed, among others, by
Dr. Atiar Rahman, Prof. Mozaffar Ahmed, BIBM director general Mainul
Islam, Uttara Bank managing director Aminuzzaman, Krishi Bank MD Mirza MA
Jalil, acting editor of Dainik Sangbad Bazlur Rahman and editor of the
Arthanitee Zahiduzzaman Faroque. Dr.
Wahiduddin Mahmud presented the keynote paper on the subject while former
finance minister AMA Muhit moderated the conference held at the National
Press Club. Dwelling
on various aspects of default culture, BIBM managing director Mainul Islam
called for setting up special tribunals for trial of willful defaulters. “Showing
collaterals, they are taking huge bank loans and are engaged capital
without paying bank loans”, he said also stressing the need for
introducing financial ombudsman to brig back discipline in the banking
sector. The
finance minister, however, said that the government could not get hold of
defaulters due to delay in judicial process and loopholes in laws. But
also pointed out that entrepreneurs could not be held solely responsible
for default culture. “The managements of banks are equally
responsible,” he added. Prof.
Wahiduddin Mahmud in his keynote paper depicted a dismal performance of
the nationalized commercial banks (NCBs) which are now burdened with
classified loans. Mahmud
pointed out how the objectives of private banks were foiled with the
diversion of funds and the accruing of huge financial benefits by sponsor
directors. He also pointed out the problems in NCBs. To
overcome the problems most of the speakers highlighted the need for taking
drastic reform measures, which, they said, would improve the situation. The
finance minister also agreed that most of the NCBs are burdened with huge
amounts of dictated credits and loans taken by Sector Corporation. “Any
sector corporations. “Any sector corporation falling seeks transmitted
liabilities to banks, said the finance minister adding that the government
was trying hard stopping this culture. “We
are trying to sell out the loss-making enterprises to get rid of the loses
but facing tremendous opposition,” said the minister stressing the
need for stopping the default culture. Dr.
Atiar Rahman, who is also a director of Sonali Bank, criticized the
government for its undue interference on the board of directors and taking
decisions without intimation to the board. “Lack
of proper evaluation of projects is another reason for default of
loans,” said Atiar charging the government with its failure to update
the financial statement. Lack
of updated information and delay in preparing balance sheets make huge
losses to the government, he said. Computers worth about million of taka
remained idle at various NCBs but the operation could not take place due
to interference by vested quarters. Uttara
Bank managing director Aminuzzaman also pointed out those government
officials would not protect interests of pubic and demand their removal
from the board of directors. Many
speakers also demanded reduction interest rates and accused the private
and foreign banks of charging high interests. The finance minister also
agreed that the new banks that have no default loan could lend money at
lower interest rates. The
NCBs cannot reduce their interest rates due to high cost, but foreign and
private banks are also not reducing their rates. They are rather making
huge profits taking the opportunities. Source: The Financial Express
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