Bangladesh banking sector in trouble

Though Bangladesh Bank [Central Bank] has categorically mentioned about not issuing fresh license to any bank in private sector, at least 5 proposed banks in the private sector, which are owned and initiated by extremely influential quarters of the ruling party have not only established offices of such "banks" but also have started recruiting manpower, though not have yet got any positive signal in writing from the central bank. A highly placed source in Bangladesh Bank, on condition of anonymity told Weekly Blitz that, they also got information of establishment of offices and recruitment of staffs by some of the so-called banks in the country, whose applications are simply lying with Bangladesh Bank without decision since 2010. The source said recruiting staffs in the name of any bank prior to approval of such banks by the authorities concerned is totally illegal. "Such activities can be treated as fraudulent attempts," the source said.

Another source at Ministry of Finance said, some influential members of the ruling party are actively pursuing the ministry as well the Prime Minister's Office for issuing permission for establishment of fresh banks in private sector. But the finance minister is unwilling to grant any new license as the existing banks in the private sector are already facing extreme adversities. Under such situation, the finance minister considers issuing fresher permission for establishing banks as "useless and unwise".

Meanwhile, another source in Bangladesh Bank said, the directors of the board of the Central Bank will sit on September 11, 2011 for deciding on issuing fresh license to any private bank. Final decision in this regard will be taken on that day. One of the directors of the central bank is continuing to create pressure on the board of directors in granting fresher license to at least "few" new applicants. Governor of Bangladesh Bank, Dr. Atiar Rahman, who was appointed on the basis of political consideration because of his affiliation with the ruling party, is reportedly also opposing the initiative of that director in giving licenses to any new banks, as presently the banking sector in Bangladesh is in serious crisis.

Though Bangladesh Bank has been continuing to oppose issuing fresher license to banks, the finance minister told media that the government is willing to give more licenses on "political consideration".

It is indicated that, despite serious objection from the policymakers, the central bank is under tremendous pressure from the ruling party 'high-ups' is granting at least 8-9 new licenses to banks. Bangladesh Bank may finally be rather compelled in issuing license to at least 3. It is learnt from Bangladesh Bank sources that during past 10 years, 82 applications for establishment of new banks were submitted by various people, most of whom are influential politicians or politically affiliated people. Out of the 82 applications, 62 were submitted during the previous government of Bangladesh Nationalist Party [BNP] and its Islamists coalition. One such application was submitted by a relative of Mufti Fazlul Huq Amini, who now faces accusations of Al Qaeda connection. It is apprehended that, Islamist and Jihadist groups might have attempted to established banks in Bangladesh through their local 'networks', mostly during the BNP-Islamist coalition government.

It may be mentioned here that, since 2001, Bangladesh Bank has taken rigid stand on not issuing any license to new banks.

During the present government of Bangladesh Awami League, some of the influential members of the ruling party have submitted application for establishment of new banks. These are: Modhumoti Bank Limited, owned by Barrister Fazle Noor Taposh [a ruling party lawmaker and cousin of Prime Minister Sheikh Hasina]; The Farmer's Bank Limited, owned by Mohiuddin Khan Alamgir [a former bureaucrat and now lawmaker and presidium member of Bangladesh Awami League]; Self Employment Bank, owned by Dr. Kabir Chowdhury [national professor]; Capital Bank, owned by Dr. S.M. Showkat Ali and Appolo Bank, owned by Dr. Shamsul Huq Bhuiyan [former chief engineer of City Corporation and leader of the ruling Bangladesh Awami League].

It may be mentioned that, there are 37 banks in Sri Lanka, 45 in Pakistan, 22 in Nepal, 19 in Thailand and 22 in Malaysia, while in Bangladesh, there are 47 banks in private and public sector.

While most of the banks in public and private sectors are suffering from severe crisis as the country's business and industrial sector is in virtual standstill for past two years, giving permission to few more new banks will only put additional burden and pressure on country's financial sector. It is anticipated that Modhumoti Bank Limited and The Farmer's Bank Limited will finally get permission from the central bank in Bangladesh, as the initiators of these banks are highly influential people as well Barrister Fazle Noor Taposh is a family member of the Prime Minister. But, issuing fresher permission to new banks will not only put extra burden on country's financial sector, but also will ultimately cause in collapse of a number of banks in the private sector in Bangladesh. Especially it will have extremely negative affect on the share market, as millions of people have purchased shares of these local banks. When the share market in Bangladesh is already in acute crisis, the next anticipation crisis in the banking sector will not only cause in additional loss to the small investors in the stock market, but also will leave serious negative impact in country's economic infrastructure.

Names of the existing private and public sector banks in Bangladesh:

AB Bank, Bangladesh;

Agrani Bank, Bangladesh

Al-Arafah Bank, Bangladesh

Bangladesh Commerce Bank, Bangladesh

Bank Asia , Bangladesh

BASIC Bank, Bangladesh

BRAC Bank, Bangladesh

City Bank, Bangladesh

Commercial Bank, Bangladesh

Dhaka Bank, Bangladesh

Dutch-Bangla Bank, Bangladesh