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Govt issues guidelines, economists not optimistic
Moinul Haque | Published: 00:03, Dec 24,2022
The government on Thursday issued guidelines on the appointment of chairpersons and directors to the state-owned commercial banks, specialised banks and other financial institutions with a rule that secretaries or officers with the status of secretary will not be made chairpersons or directors at any of the entities.
The government formulated the guidelines on forming boards of directors for the state-owned banks and financial institutions for the first time amid a surge in defaulted loans in the banking sector.
Economists, however, doubted improvement in the banking sector plagued by a governance crisis as a result of the new guidelines.
They said that the dual authority over the banking sector would prevent positive results from happening rather the Bangladesh Bank should be empowered to oversee all the private and public banks.
The Finance Division under the finance ministry issued a gazette notification on Thursday, saying that the guidelines were issued with an aim to form boards of directors for banks comprising competent and professionally skilled persons so that they could devise policy guidelines and supervise business activities of the state-owned banks and financial institutions efficiently as well as ensure good governance in bank management.
According to the guidelines, approval from the prime minister will be required for the appointment and reappointment of chairpersons to the state-owned commercial banks, specialised banks and other financial institutions while approval will be required from the finance minister in appointing and reappointing directors to the institutions.
The guidelines said that any officer with the status of secretary would not be allowed to be the chairperson or a director at any state-owned commercial bank, specialised bank and financial institution.
South Asian Network on Economic Modeling executive director Selim Raihan told New Age on Friday that currently the banking sector was facing a serious governance crisis and the BB should have power to control the sector for improvement.
‘All the relevant issues should be handled professionally — not politically,’ he said.
According to official data, the volume of defaulted loans soared to Tk 1,34,396 crore at the end of September from Tk 1,25,257 crore at the end of June.
As of September 2022, scam-hit Janata Bank held the highest amount of defaulted loans, Tk 20,255 crore, which was 27.93 per cent of the total outstanding loans held by the state-owned banks.
Sonali Bank, another state-owned commercial bank, suffered the second highest defaulted loan quantity, Tk 12,443 crore, with the NPLs hitting 17.15 per cent of its outstanding loan amount.
Agrani Bank, another SCB, held the third highest amount of defaulted loans, Tk 12,186 crore, representing 19.28 per cent of its outstanding loan volume.
State-owned BASIC Bank’s defaulted loan volume stood at Tk 7,959 crore at the end of September 2022, representing 58.52 per cent of the bank’s outstanding loans.
Rupali Bank’s defaulted loans reached Tk 5,726 crore, accounting for 17.58 per cent of its total outstanding loans.
According to the guidelines, a four-member committee headed by the Finance Division secretary would work as a scrutiny committee in appointing chairpersons or directors to the state-owned commercial banks and financial institutions.
Policy Research Institute executive director Ahsan H Mansur told New Age on Friday that the scrutiny committee should not be formed comprising government officials as the government nominates people for the posts of directors at the state-run banks.
He viewed that financial sector experts, economists and bankers should be included in the committee.
Without common guidelines for both state-run and private banks and financial institutions, the current crisis in the country’s banking sector will not improve, he further observed.
Where applicable, the appointment of independent directors to boards would be allowed with approval from the Bangladesh Securities and Exchange Commission, the guidelines said.
According to the guidelines, if a person becomes a director of any bank, financial institution or insurance company, he/she will not be allowed to be director of any other bank.
The guidelines also said that the tenure of a director appointed by the government to a state-owned commercial bank, specialised bank or any other financial institution or to a private bank or financial institution would be three years.
A person will not be allowed as director for more than three consecutive terms and he/she would be allowed to be director of a bank or a financial institution three years after the expiry of the three terms, the guidelines stipulated.
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https://www.newagebd.net/article/189792/govt-issues-guidelines-economists-not-optimistic
