A recent research study conducted by a former Bangladesh Bank governor has come up with some startling facts. Of the eighteen banks surveyed, their managements were clueless about where the credit was going. Indeed, several senior bank officials, both serving and retired, have stressed that bank credit must be prioritised to meet the needs of productive sectors.
With private sector growth hitting an approximate 19.9 per cent, it becomes more imperative than ever that adequate bank credit is made available to it so as to ensure desired economic growth. Needless to say, banks are required to make profit. Hence, there has been a move by certain banks to invest in areas that generate a higher rate of return than industrial loans. This has been made possible due to lax monitoring by the central bank (BB). However, for BB to carry out its role as monitor properly it will require to be empowered and made fully autonomous -- two areas that remain sadly unaddressed till date.
The debate on further credit to private sector is strong on both sides. BB maintains that higher credit flow to private sector may fuel double-digit inflation. The counterargument to this is an expanding private sector not only helps develop the economy but also generates new employment. Both arguments are valid, but that is not the question here. The fact that even after the largest financial scam of the country, that of the Hall-Mark Group, the scars of which are still fresh in people's minds, we are seeing a re-enactment of poor monitoring and overseeing by BB. This obviously cannot be allowed to continue. The government must act decisively to arm BB with both tools and authority so that it may safeguard the national financial interest.