Plunder In Disorder

New bout of corruption is seen in bank.
Malpractices reach even low rank.
Bangladesh is high on a fever.
This has become the mot of some clever:
"O wind! put everything in disorder!
Let me relish much of the plunder!"

News reports in recent weeks once again disclose that corruption and malpractices in Banking sector, which has already been reeling from earlier scams, continue unabated. No change in corporate governance and no change in business as usual. The disappointing picture is writ large on all the financial institutions of Bangladesh.

A news report, dated on November 30, says government mulls retaining political appointees in the management board of public banks. In the past this kind of appointment set the path for seeking loan for project deemed not-profitable and triggered corrupt acts abusing the power. This politically motivated projects and mismanagement of the boards in the end contributed to piling up of bad loans (NPL). Back in June 2019, I wrote an analytical piece titled " Default Loans: In Search Of Root Cause" on this blog.

In 2010, the amount of NPL was Tk 227.1 billion and rose to Tk 893.4 billion by the end of June 2018 (Source: Bangladesh Bank). A little less than 50% of those NPLs belonged to state-owned commercial banks (SCBs). Meanwhile, NPLs for private commercial banks(PCBs) and foreign commercial banks(FCBs) stood at Tk 389.8 billion and Tk 22.7 billion respectively. One may argue that SCBs operations and client base are much bigger than those of PCBs and FCBs. Gross NPL to total loan or net NPL to total loan , which Bangladesh Bank uses to measure asset quality, may give a better indication of comparison of bad loans by types of banks. In 2010, gross NPL to total loan by SCBs was 15.7. Meanwhile, it was 3.2 per cent for PCBs and 3.0 per cent for FCBs.(Source: Bangladesh Bank) By the end of June 2018, gross NPL to total loan for SCBs, PCBs and FCBs rose to 28.2, 6.0 and 6.7 percent respectively. It is evident that percentage of bad loans to total loans is far more higher in SCBs than those in PCBs and FCBs. How the decision is made at the management board calls for greater scrutiny.

One of the public banks has come under scanner after a news report divulged that $603,947 had gone missing from an exchange house in New York operated by Janata Bank. Stealing had taken place in the transition period, when outgoing CEO would hand over the responsibility to incoming CEO. A temporary worker had been playing the role of acting CEO in the meantime. The exchange house maintained an account at the Habib American Bank's New York branch. It appeared that the acting CEO did not deposit the money at the Habib Bank account contrary to her claim. While the acting CEO was stopped answering to official emails and shut all the contact with her employers. The Janata Bank authority decided to settle the matter through legal means. It is surprising that a temporary telephone operator turned CEO was given the charge to run an exchange house, which has already been on a loss-making path, in foreign shore. This incident laid bare how clumsily decisions are being made in public financial institutions.

Unbridled corruption is taking place at private banks too. A data entry operator, who got the job by forging educational certificate, swindled Tk 80 million from NCC Bank. He even constructed a six-storey building, bought residential plot and car at native village.

A staff at Premier Bank in Rokeya Sharani branch took loan in the name of two clients manipulating office documents. He invested the money in his family run grocery. One of the victim clients got aware of this when he applied for loans in other bank. Bangladesh Bank has stipulated that client took a certain amount loan not be eligible for further loan. Denial of the client's loan request surfaced the murky scam.

Last year I did a small survey among some rickshaw pullers. One puller shared with me a fraudulent incident. The rickshaw puller opened a deposit account, which would become mature in two years, at a private bank. He regularly deposited the monthly amount in time. By the time the account got matured , he came to learn that he would have to wait for another year for its maturity. He protested. But he was told one of the cashiers did not keep record of any money of his account for a year. Daily wage earners are not even spared from the greed of corrupt staffs.

What we are seeing is mimicking of corrupt practices at individual level in the banks. If the management and high officials could indulge in corrupt practices and go scot free then it is ok for a staff to take one or two "peanuts"! More aptly, trickle down of corrupt practices from top to bottom. When the fever of "Ektu Elo Melo Kore De Ma/ Lute Pute Khai( O wind ! put everything in disorder / let me relish much of the plunder)"[I borrow the lines from a popular song of the film "Jamai 420"] sweeps across the Bangladesh, it would be naive to expect dramatic improvement in corporate governance.

Until the feverish pitch for corruption subsides, replacing one political appointee with another, curtailing the power of central bank, changing regulations, interfering with the decision making process of the management board will not produce the desired outcome in financial institutions. What has to be changed first is the attitude and tolerance towards corruption.