Despicable performance of state banks

As we have repeatedly warned in this column, irregularities, mismanagement and corruption have left the banking sector in an awful mess. Despite the government injecting Tk 9,639 crore into state-owned banks over the last four years, it has again set aside Tk 2,000 crore this fiscal year to "recapitalise" ailing banks. 

Total defaulted loans of the six state-owned banks stood at Tk 34,581 crore, which was 27 percent of their total loans, whereas, the average rate in the sector was just 10.13 percent. What this indicates is that the performance of state-owned banks has been much worse, the responsibility for which must also fall on the government and its regulatory agencies for failing to curb corruption and mismanagement in the sector.

Meanwhile, as this newspaper reported yesterday, the top 20 defaulters—owing Tk 11,579 crore as of June 2017—accounted for one-third of the state banks' total defaulted loans in the first half of this year. This amount, according to the finance ministry, made up 33.48 percent of the lenders' total defaulted loans, lending credence to allegations that the primary reason for the banking sectors' woes has been defaults by big borrowers who were given loans based on partisanship. 

In a statement made on Saturday, the finance minister said that he felt "ashamed" at the poor performance of state banks, and he well might. While we appreciate his remorse, belated as it may be, what is needed is substantive action and for such detrimental performance not to be repeated. In the case of previous financial scandals, government regulatory agencies had all failed to act, blaming each other while the public coffers were looted. The government should make a full hearted effort to recover these lost amounts and punish those responsible for allowing such looting to happen.