An injudicious decision
WHEN the country is undergoing a very difficult economic period for which the government must certainly bear a large amount of responsibility, it almost appears unbelievable that the government is now going around approving new banks since most economists concur that it can only make the situation worse. According to a report front-paged in New Age on Thursday, the Bangladesh Bank has already approved the setting up of three new banks by non-resident Bangladeshis. Moreover, the central bank is slated to give approval to more commercial banks in its next meeting on Sunday. According to the report, the Bangladesh Bank is under tremendous pressure from the government to approve these new banks as most of the applications have come from influential individuals affiliated with the ruling party and its allies. The ‘alleged’ pressure is self-evident from the list of people vying to set up banks.
By most accounts, whether it come from ordinary people on the streets or esteemed economists, the economy is going through a trough. While the government has often blamed global recession for this, or outright denied the economy was in poor shape, it is now generally accepted that the government’s decision to generate power through rental power plants, or its handling of the stock market crash, as well as general economic mismanagement, have significantly contributed to the poor state of the economy. Most economic indicators, be it inflation, the level of foreign currency reserve, the level of government borrowing, are negative. In such circumstances, in other countries, the common practice is to see the number of banks shrink down, mostly through mergers, to weather the storm. On what motivation, and to what purpose, are the applications for new banks coming in and the government is approving it is anyone’s guess.
The finance minister in the past described the government’s decision to allow new banks ‘a matter of the government’s political wish.’ In fact, both the finance minister and the central bank governor have in the past voiced concerns over the operations of private commercial banks, also partially to blame for their role in the share market crash, and have directly and indirectly suggested that the number of private banks is already beyond necessity. In fact, most economists and financial experts agree that the present number of banks, 47, are quite adequate, if not more than necessary, for an economy our size. And now the governor has signed through three new banks and is expected to pass through at least five more on Sunday.
The government needs to realise the dangers faced by the economy and the role they have played in bringing it to this place. Instead, like in every other sector of the government, partisan interests appear to be once again taking precedence over serious national concerns.
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