Originally posted in The Business Standard on 5 March 2025
Lower loan interest rates alone won’t suffice, fixing law and order key to reviving investment
Addressing law-and-order issues is crucial for stabilising Bangladesh’s economy and attracting investment, as rising bank interest rates and increasing utility costs have significantly affected investment, said MDs and chairmen of various banks during a roundtable discussion organised by The Business Standard at its office in the capital yesterday. Key excerpts from their remarks are presented below.
Fahmida Khatun
Executive Director, Centre for Policy Dialogue
Due to political interference, the autonomy of the Bangladesh Bank has completely collapsed and needs to be restored. The Bangladesh Bank Amendment Act 2003 grants the central bank enough power for autonomy.
However, in the last three terms, politically aligned and loyal individuals have been appointed as governors. According to the central bank’s policy, no former or current civil bureaucrat is eligible to be the governor, but this has been violated in the last two terms.
Many types of reforms are being implemented now, and alongside this, human resource and skill development are also needed. The Bangladesh Financial Intelligence Unit (BFIU) is doing a lot of good work; however, skilled human resources are essential for recovering stolen assets and non-performing loans (NPLs), merging weak banks, or taking any other necessary steps.
Our observation about the Financial Institutions Division (FID) is that there is dual administration taking place. If it is not closed, the central bank will not be able to work independently. It was closed once in 2010 and then reopened because the FID became a place for lobbying. Decisions about who will be the directors of a bank or who will be in management are made there. If the FID continues to exist, their surveillance over the central bank must be stopped.
The Criminal Investigation Department (CID) report on the money that was stolen from the central bank through cyberattacks has been postponed 80 times. Why is the report not being made public? It may be due to some kind of sensitivity. The decision-makers say that since the case is being conducted outside the country, if the information is leaked, the case will become weaker. However, we have not received any formal response from the CID or the government on this.
There is also a need to modernise or update the Money Loan Court and the Bankruptcy Act. With elections coming up in a few months, if the political government does not have the will, this reform initiative will be left in the dust. If that happens, it will be very sad. So, the bottom line is that if we do not move forward with political will, we will not see the potential that the banking sector has.