Tk 92,261cr vanished in 24 financial scams over 15 years: CPD

Between 2008 and 2023, Bangladesh witnessed at least 24 major financial scams, resulting in a loss of Tk 92,261 crore —equivalent to 12 per cent of the previous fiscal year's budget. During this period, defaulted loans have also surged to Tk 1,82,295 crore, according to the Center for Policy Dialogue (CPD).

At a media briefing titled “What to Do to Bring Back Good Governance in the Banking Sector,” held at the CPD office in Dhanmondi on Monday (August 12), CPD Executive Director Fahmida Khatun presented these findings. CPD Honorary Fellow Professor Mostafizur Rahman and Research Director Khondaker Golam Moazzem were also present.

Fahmida emphasised the urgent need for reforms in the banking sector, noting that such changes could significantly boost the economy. She identified several critical issues plaguing the sector, including institutional weaknesses in banking institutions, the erosion of the central bank's independence, the granting of licenses to private banks without proper oversight, and the dominance of oligarchs in the banking sector.

"Banks have institutional weaknesses," Fahmida stated. "The selection of board members, the process of sanctioning bank loans, and compliance with international standards are all weak. The central bank has completely lost its independence, with a duality of administration prevailing. Financial institutions have been created to control the central bank, which is unnecessary. No proper judicial analysis has been conducted in granting licenses to private banks, leading to the creation of self-interested groups. These banks lack the capacity and are often recapitalized with government funds, wasting public money."

Fahmida also criticised the creation of an oligarchic structure within private sector banks, where a few entities control the banking sector and influence the central bank's policies. "The amendment of the Banking Companies Act has weakened the sector, allowing loan defaulters to escape accountability," she added.

She further claimed that over the past 15 years, officials of Bangladesh Bank, including its governors, have violated numerous rules to benefit specific groups, resulting in the disbursement of thousands of crores of taka to these groups. She demanded that those involved be held accountable and punished.

"The amount of defaulted loans has been increasing," Fahmida pointed out. "In 2009, it was Tk 22,481 crore, which has ballooned to Tk 1,82,295 crore as of March this year. The theft of Bangladesh Bank's reserves in 2016 is still under investigation, with the Criminal Investigation Department (CID) having sought 79 extensions to complete the probe. The next deadline is September 4."

Fahmida also called for the dissolution of the Financial Institutions Division of the Ministry of Finance, arguing that it hampers the independence of Bangladesh Bank. "The Finance Ministry's Financial Institutions Division, or FID, was created to influence the banking sector. We believe there should be an inquiry into wrongful loans or decisions, and our recommendation is to close the FID, as it serves no real purpose," she said.

Professor Mostafizur Rahman echoed these views, stating, "We were morally aligned with the students' movement and the liberation march, but we must now focus on those who have sacrificed themselves. A white paper on corruption in the financial sector should be prepared, and accountability must be ensured in the banking sector."

Dr Golam Moazzem added that the challenges facing the banking sector extend to the financial sector as a whole. He highlighted the poor condition of Bangladesh's capital market and the insurance sector, calling for the closure of entities that fail to uphold good governance in the financial sector.