Where has all the cash gone from the banks?

Where has all the cash gone from the banks?

Sanaullah Sakib |
Update: 11:56, Jun 11, 2019

A huge budget looms massive ahead of the state, whereas the bank vaults seem empty. With huge expenditure within the offing, funds appear to own dry. it's beneath such circumstances that minister of finance AHM Mustafa Kamal is equipped to gift the TY2019-20 national budget.
The banking sector is in shambles. tho' the gross domestic product is display to exceed eight per cent, the banks are lacking in vitality. the economic sector investment is entirely smitten by bank loans, however a fund crisis prevails. thus wherever has all the cash gone?

Experts contend that bank loans aren't being repaid, default loans are merely on the increase. Capital flight continues fully swing. the general public lack confidence within the industry and deposits diminish.

Speaking to Prothom Alo, chairman of People's Republic of Bangladesh automotive vehicle Rerolling and Steel Mills Association, Monowar Hossain, said, “I am bemused regarding wherever all the cash goes. the govt. should inspect whether or not back cash is being siphoned aloof from the industry.”

The country’s economy is currently smitten by the personal sector. The personal sector is additionally the most supply of job creation. however entrepreneurs are at a loss, long-faced with the credit crunch of the banks. it's troublesome to avail new loans and, at the identical time, interest rates surpass fifteen per cent. Even the older businesses are troubled to run because of this fund crisis.

Monowar Hossain aforementioned, “No one is obtaining cash from the banks, neither the large businesses nor the medium ones. we have a tendency to aren't even obtaining running capital. this is often a heavy state of affairs.”

Revenue sector financial gain can solely increase if the economy is spirited, if investment within the production sector will increase and if businesses expand. however the banking sector crisis can impact the whole economy. The new minister of finance currently faces the challenge of restorative the banking sector.
Former president of Dhaka Chamber of Commerce and business (DCCI) Abul Kashem Khan says that once banks have inadequate funds to supply loans, this affects the general economy. The loan flow to the personal sector began decreasing from Gregorian calendar month. Interest rates are mounting. All this has created things troublesome for the economy. He feels that various measures ought to be taken within the forthcoming budget so as to scale back dependence on bank loans.

Interest rates in an exceedingly mess
Faced with the credit crunch, personal sector bankers from high to the underside, are urgently seeking depositors. The personal banks are currently running on loans from the financial organization and state-owned banks.

Other than the state-owned banks, only a few have adequate funds for investment. several of those banks are currently sharply following depositors. Padma Bank (formerly Farmers’ Bank) is promising depositors to double their deposits inside five years, which means AN over fourteen per cent charge per unit. however town Bank, another personal bank, can double deposits in nine years, with a 7.75 per cent charge per unit. during this chaotic state, interest rates are on an increase and should even hit sixteen to seventeen per cent.

Commenting regarding the general condition of the banking sector, BRAC Bank administrator Selim RF Hossain told Prothom Alo, twenty six to twenty seven per cent of the liquidity had gone into saving certificates. most are choosing saving certificates because of high interest rates and tax exemption. Then again, exports have hyperbolic in proportion to imports. this is often golf shot pressure on exchange rates. Default loan have conjointly delayed funds. Default loans should be repaid so as to resolve the prevailing credit crunch. Laundered cash should be brought back and endowed.
Incidentally, the US-based analysis institute, world monetary Integrity, aforementioned that over the past one decade, regarding Tk seventy billion has been bootleg out of People's Republic of Bangladesh.

Who are becoming the loans?
An analysis of the sector-wise bank loans reveals that over the past 3 years, the foremost loans are being provided to the development business and contractors. The contractors are essentially people who have availed contracts with the govt. mega comes. The banks are wanting to give such loans as reimbursement comes simply from government bills.

According to financial organization records, loans to the development sector and contractors in 2016 amounted to Tk 482.80 billion. In 2017 this hyperbolic to Tk 582.20 billion. In 2018 this went up to Tk 614.30 billion.ঃ

The bank officers say that the most important comes afoot are the Padma Bridge, Metro Rail, Rooppur nuclear energy plant, the multilane main road and such. There are many district level comes in progress too. The banks are providing loans to the native contractors for these comes.
Chairman of the Association of Bankers People's Republic of Bangladesh, Syed Mahbubur Rahman, told Prothom Alo that each one banks are wanting to give loans to the contractors because the may be a large quantity of state work happening. The loans are repaid as presently because the government bills come back through.
Central bank, a silent spectator

The financial organization remains a silent spectator, taking no initiative up to now to deal with the crisis within the banking sector. On the contrary, it's turning out with polices to facilitate the loan defaulters time and once more. Its observation system is weak then irregularities slip tho' the loopholes, unobserved and unadmonished.

Former governor of People's Republic of Bangladesh Bank Salahuddin Ahmed told Prothom Alo that a bank commission is required, whether or not on a short lived basis, to tackle the issues within the banking sector.