Bangladesh's banking sector lost Tk92,261cr from major scams since 2008: CPD

The amount of money stolen from the banking sector through 24 major scams since the fiscal year 2008-09 has reached Tk92,261 crore, according to the Centre for Policy Dialogue (CPD).

The total loss might surge even higher if smaller irregularities - like loan write-offs, rescheduling, and court stays - were considered, CPD Executive Director Fahmida Khatun disclosed during a press briefing today (23 December).

This disclosure came to light as CPD has prepared an assessment report titled "State of the Bangladesh Economy in FY2023-24 (First Reading), as part of the think tank's Independent Review of Bangladesh's Development (IRBD) programme.

Fahmida Khatun noted that loan defaults have surged almost three and a half times since 2012 due to irregularities.

The consequences of these defaults ripple through both public and private banks, intensifying liquidity crises and escalating provision deficits.

Dr Fahmida drew attention to state-owned banks, particularly the specialised banks, indicating a worrying trend in the overall banking system.

While presenting the interim review of the economy, Dr Fahmida said, "The looted sum equates to a substantial portion of the government's fiscal deficit, significantly impacting social security, education, and healthcare sectors."

Criticising the central bank's role in safeguarding public funds, Dr Fahmida pointed out weak policy measures and asserted that beneficiaries influenced the policy-making.

Bank MDs working under increased stress due to default loans, board interference: Experts

"Once-stable private banks are now facing a different situation, raising worries about a single-class control in banking," she said.

She also noted that the country's banking sector is being controlled through a consolidated group.

"Although efforts were made to control inflation through increased bank interest rates, the impact on consumer prices remains negligible due to delay in the initiative," Dr Fahmida further said.

She proposed reinforcing the Competition Commission to curb price inflation and called for heightened monitoring of syndicates. 

Additionally, she urged for increased wage rates and expanded cash and commodity assistance to alleviate inflationary pressures.

At the event, Professor Mustafizur Rahman, a distinguished fellow of CPD, said the state of the economy has now become riskier compared to recent years. 

Pointing out that the prices of goods at the consumer level are much higher due to adjustments in the import and production stages, Mustafizur said, "The wealth of the poor is being transferred to the rich due to excessive inflation."

He suggested solving these issues by coordinating interest rates, exchange rates, and other factors.

"In 2010, the income of the top 5% of the earners was 30 times more than the lowest 5%. But this gap has now increased to 80 times," Mustafizur said.

Furthermore, he noted that in 2010, the income of the top 5% of earners was 30 times that of the lowest 5%. But this gap has now increased to 80 times.

During the discussion, Mustafizur emphasised the importance of tax collection in ensuring fairness in distribution.

However, he observed that there has been no improvement in this area. 

"Due to the lack of increase in revenue collection, the entire income is being spent on revenue expenditure, making development entirely dependent on loans," he said while expressing concern that this situation could lead the economy into a trap if more loans are taken to pay off existing debts.

Instead of taking loans to build new large-scale infrastructures, he advised focusing on advancing current projects and profitably managing existing infrastructures.

At the press conference, CPD Executive Director Dr Khondaker Golam Moazzem, Senior Research Fellow Towfiqul Islam Khan, and other researchers delivered their speeches.