The Centre for Policy Dialogue on Monday observed that the recent trend in the performance of the banking sector which is encumbered with inefficiency and
malpractices was not supportive to a sustained economic development.
‘Overall performance of the sector has not been satisfactory in recent times as non-performing loans is increasing, credit growth to the private sector is decreasing and bank interest rate also remains high,’ the CPD said in its second analytical review of macroeconomic performance in the FY 2013.
It also said that some big financial malpractices such as Hallmark Group and Bismillah Group scams had pushed the banking sector into a crisis of confidence, it said.
At a press briefing on the review held at the CPD office, CPD executive director Mustafizur Rahman said in the recent past banking sector had come under criticism due to banks’ involvement in increased number of financial scams involving huge amount of money and rising amount of default loans.
He said that high non-performing loans pushed the interest rate of banks upward as banks tried to make up for their losses from such loans.
The amount of non-performing loans has piled up in the state-owned commercial banks at 23.87 per cent of total such loans in 2012 due to financial scams of Hallmark and Bismillah groups which embezzled large amount of money.
The CPD apprehended that there could be many cases of forgeries which might be unearthed in course of time and pose further threat towards the stability of the banking sector.
‘It is a paradox that there is a huge excess liquidity in the banking sector but interest rate is not decreasing,’ he said adding that investors could not be benefited from lower inflation because of higher interest rate.
Commercial banks are trying to make up for their lower profits with high lending rates, he said.
In its review, the CPD, country’s leading independent research organisation, said that the accumulation of excess liquidity was not only a reflection of low demand for funds. It also indicates weak supervisory and poor portfolio management of commercial banks.
Several malpractices of commercial banks have also contributed to the weak performance of the banking sector, it said.
The CPD suggested that there should be further reform measures to streamline the activities of the sector towards improving its performance.
-With New Age input
