Ensure independence of Bangladesh Bank

Against the backdrop of increasing incidence of default loans and inability to implement banking sector regulations, Bangladesh Bank (BB) is faced with the uphill task of streamlining the sector so it can bring discipline and function better. The unhealthy culture of non-payment of loans by big borrowers has become endemic in Bangladesh, forcing a crippling effect on many banks. The gravity of the situation can be construed from the words of Mashiur Rahman, economic affairs adviser to the prime minister. He said that "non-performing loans (NPLs) in the banking sector had gone beyond control. If banks are unable to recover default loans and mobilise new deposits, the capacity of giving out loans by lenders faces a setback. He called non-payment of loans a social crime."

The fact that the central bank has to wait for the clearance from the finance ministry before taking decisions on major issues also becomes a deterrent in most cases. The panacea, as suggested by a number of former BB governors, is greater autonomy of the bank. Besides the veteran bankers, eminent economists of the country, while commenting on the issue, also emphasised the importance of ensuring integrity in the financial sector to keep it stable. We welcome the expert suggestion for improving the skills of the bank officials while verifying borrowers' ability to repay loans and that an effective bankruptcy act should be there to solve the problem.

We believe with greater power in the hands of the central bank, it would become possible to restrict and bring down the incidence of default loans. An autonomous central bank with the mandate to take decisions independently will contribute to creating a vibrant banking sector crucial for accelerating the economic growth of the country. And it has to be ensured at the same time that Bangladesh Bank will not be subjected to any kind of political pressure while executing their duties.

The collective wisdom of the eminent bankers and revered academics of the country should be taken into cognisance by the authorities concerned and they should act accordingly for the good of the country.