Proposed structural changes to go against good governance

Dhaka,  Fri,  22 September 2017
Published : 13 May 2017, 22:54:27
Banks' board of directors

Proposed structural changes to go against good governance

Mirza Aziz tells debate programme in city
FE Report

Former advisor of caretaker government Dr. A B Mirza Azizul Islam Sunday said the government's move to double the number of directors in a bank's board from a single family and extending the tenure of directors will be against good governance in the banking sector.

Mr Islam, also a leading economist, censured the amendment made to the Bank Company Act-1991 to this effect.

He was speaking as chief guest at a mock parliament session on 'economic danger of the country if corruption, irregularities and money laundering can't be stopped" at the Bangladesh Film Development Corporation (BFDC).

Debate for Democracy organised the programme where ASA University Bangladesh acted as the ruling party and Bangladesh University of Business and Technology (BUBT) as the opposition.

Chairman of Debate for Democracy Hassan Ahamed Chowdhury Kiron presided over the programme.

Speaking at the programme, Mr Islam said the country will be in great economic risks if good governance cannot be ensured in the financial sector.

He said low financial capacity and rise in classified loans are also indicative of the fact that good governance is not there in the financial sector at the moment.

"In 2010, classified loans stood at 7.2 per cent but up to December last year, it swelled to 9.2 per cent," Mr. Islam said.

He said most of the bank's loans are given to a select number of borrowers. "This can never be a good sign."  

The former advisor said net interest spread in the country's banks is around five per cent but the international standard is around 3.0 per cent.

"Besides, sluggish private investment over the last couple of years also indicates that our banking sector is not being run efficiently," he said.

The noted economist said investment in rural areas is also significantly low where banks and financial institutions should give special attention.

He said the role of banks and other financial institutions is crucial for a country's development. But corruption, lack of good governance and irregularities do also pose serious threats to the economy, he added.

He said banks and financial institutions should take some steps including strengthening of internal control, real valuation of collaterals and regular monitoring to ensure use of the loans for purposes for which these are taken.

"I think, If anyone fails to repay the loan according to the timeline, the issue should be discussed with him. If needed, he can be given some options to repay the loan. If this also fails, legal action should be taken," Mr. Islam said.

He also said all loan-related cases should be settled speedily to boost the performance of the country's financial sector.

Regarding the new Value Added Tax (VAT) law, Mr. Islam said 15 per cent rate is high. This should be reduced.

 "I think 10 per cent is reasonable. VAT rate in all our neighbouring countries is also below 15 per cent," he said.

Mr. Islam said the National Board of Revenue (NBR) also should identify new taxpayers instead of increasing taxes on existing ones.

Regarding the next budget, he said its size should be determined considering the capability of the country.

"For an implementable budget, capacity of the country should be considered first," he added.

Mr Hassan Ahamed Chowdhury Kiron said lack of good governance in the financial sector negatively influences the overall economy of the country.

He said some influential politicians, bureaucrats and dishonest businessmen are making huge black money through corruption and irregularities in financial institutions and big projects.

"Such illegal money is being invested in different countries including Thailand, Malaysia, Hong Kong, Canada and Australia. This is not good for the country's economy," he added.

Editor : A.H.M Moazzem Hossain
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