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Bleeding in banking sector: Tk 92 thousand 261 crore scam

Scam in Banking Sector

The Center for Policy Dialogue (CPD) has revealed a staggering loss of Tk 92,261 crore from the banking sector in Bangladesh over the 15 years from 2008 to 2023. This was revealed at a media briefing titled Bangladesh Economy 2023-24: This information was disclosed during the discussion on the ongoing crisis and actions at the CPD office in Dhanmondi on Saturday, December 23. CPD Executive Director Fahmida Khatun highlighted the various financial irregularities plaguing the banking sector and stressed the need for urgent reforms to safeguard public funds.

Background of Financial Irregularities:

Fahmida Khatun, executive director of the Center for Policy Dialogue (CPD), painted a dismal picture of the financial situation, revealing the many irregularities that contributed to the staggering losses of Rs 92,261 crore from the banking sector. Among various malpractices, Khatun singled out two particularly alarming trends – loans secured by forged documents and loans issued in the name of non-existent entities.

1. Money loans secured through forged documents:

A primary and main cause of financial haemorrhage was the sanctioning and disbursement of loans based on forged documents. This practice involves submitting false or inaccurate financial information to secure loans, deceiving banks and compromising the integrity of the loan approval process. The extent of these practices and system weaknesses revealed by the CPD report warrants investigation into such fraudulent activities.

2. Loans issued in the name of non-existent company:

Another issue of financial irregularities was the granting of loans in the name of non-existent institutions. These fraudulent tactics include creating fictitious entities to obtain loans, diverting funds from their primary purpose and putting a serious strain on the financial institutions involved. The revelation of such practices raises questions about the effectiveness of due diligence processes within the banking sector.

Role of Media in Exposing Irregularities:

The CPD report highlighted 24 specific incidents of fraud or irregularities that occurred between 2008 and 2023. What makes these revelations particularly interesting is that many of these incidents were absent from official records. Instead, they were brought to public attention through media reports. It emphasizes the major role played by the media in exposing financial anomalies that otherwise went unnoticed. Journalists, by scrutinizing the activities of the banking sector, act as watchdogs, bringing accountability to the fore.

Concerns about public funds:

The cumulative effect of these financial irregularities has left the banking sector in a precarious position. Beyond the immediate financial loss, there are growing concerns about the efficient use of public funds. Public confidence in the banking system is at stake, as citizens question the safety and integrity of their deposits. The realization that significant sums have been siphoned off through fraudulent practices calls for increased oversight, regulatory measures and institutional reforms.

The accounts of financial irregularities described by Fahmida Khatun reveal the systemic weaknesses that underlie the misuse of funds in the banking sector. The CPD report serves as a wake-up call, stressing the need for vigorous action to restore public confidence and ensure responsible and transparent management of public funds within the banking sector to address these irregularities.

Public Partnership: Maintaining Transparency and Accountability in the Banking System:

With the revelations of huge losses of Rs 92,261 crores, it has become imperative to acknowledge the important role of the people in this financial crisis. The money lost in these events does not represent mere numbers on the balance sheet; It is the hard-earned income of the citizens, deposited in banks with the expectation of responsible and transparent management.

1. Public trust and expectation of money:

The essence of a thriving banking sector is maintaining the trust that individuals place in financial institutions. When citizens deposit their money in a bank, the bank will protect their funds and manage them prudently. The financial irregularities highlighted by Fahmida Khatun in CPD raise the question of how much this trust has been breached over the years.

2. Misuse and waste of money:

  Fahmida Khatun has rightly pointed out that misuse and wastage of these government funds is a serious problem. The level of losses not only affects individual depositors but also has far-reaching implications for the overall financial health of the country. Funds that could have been channeled into developmental projects, social welfare initiatives or economic stimulus packages are now lost, exacerbating the adverse impact on the country’s progress.

3. Right to Money Information:

Khatun emphasized a fundamental principle – the public has a right to know how their money is being managed and spent. Transparency is the foundation of a healthy financial system and citizens must be informed about the activities and decisions of the banking sector. These financial irregularities raise concerns about lack of disclosure, lack of accountability and the need for more open and communicative relationships between financial institutions and the public.

4. Enhanced Security and Accountability:

  Increased scrutiny and accountability within the banking sector is urgently needed in response to these revelations. Regulatory agencies, in cooperation with financial institutions, must take measures to prevent, detect and punish financial irregularities. This includes a comprehensive review of internal controls, adoption of advanced monitoring technology and establishment of rigorous audit processes to ensure that public funds are managed with the highest due process.

Implications for National Development:

The revelation of a staggering loss of Rs 92,261 crore in the banking sector in the last 15 years casts a deep shadow on national development. Fahmida Khatun, executive director of the Center for Policy Dialogue (CPD), rightly challenged stakeholders to consider the far-reaching consequences of this fiscal hemorrhaging.

1. Bridging the fiscal deficit:

The huge amount of lost money in the banking sector is a significant blow to the country’s financial stability. Khatun’s challenge to stakeholders highlights the potential of this money to address the country’s fiscal deficit. Closing this deficit will not only restore fiscal balance but also give the government additional resources to invest in key areas such as infrastructure, public services and economic development.

2. Investment in Social Security:

  The lost funds could play an important role in strengthening social security initiatives. These initiatives are critical to creating a safety net for vulnerable populations, ensuring citizens have access to essential services and supports. From unemployment benefits to health care provision, misappropriated funds represent a lost opportunity to enhance the nation’s social well-being.

3. Education and Health Initiatives:

  Loss of Tk 92 thousand 261 crore to education and health as the mainstay of national development could have helped to promote these sectors. Investing in education can lead to better infrastructure, better education programs and greater opportunities for all citizens. Similarly, lost funds in the health sector can contribute to the development of strong health care systems and provision of better medical services.

4. Missed opportunities for economic growth:

National development is intrinsically linked to economic growth. Such a large amount of mismanagement creates a significant barrier to achieving economic potential. The lost funds can be used to stimulate economic activity, support small and medium enterprises and encourage innovation. These lost funds are important ingredients for sustainable and inclusive economic growth.

5. Immediate action required:

  Fahmida Khatun’s call for immediate action is not only a plea for accountability, but also a recognition of the urgency to correct this situation. Misappropriation of funds is a menace that demands swift and decisive action. Authorities must institute reforms, strengthen the regulatory framework and hold those responsible accountable to restore confidence in the financial system and pave the way for genuine national development.

Fraud in Banking  

Urgent reforms to restore financial integrity of Bangladesh:

The revelation of a Tk 92 thousand crore scam in the banking sector by the Center for Policy Dialogue (CPD) serves as a clear indication of the pressing challenges facing the financial sector in Bangladesh. Mismanagement of public funds not only threatens the stability of the banking sector but also casts a shadow on the overall progress of the country. Urgent and comprehensive reforms are now essential to address these issues, to ensure that public money is managed responsibly and transparently in the interest of the nation.

1. Serious concerns about financial governance:

The prevalence of financial irregularities, as discussed by the CPD, raises serious concerns about the state of financial governance in Bangladesh. This points to weaknesses within the banking sector that have allowed such significant losses to occur over the past 15 years. The need for urgent attention to solve these problems is undeniable.

2. Reduced stability and progression:

Mismanagement of public funds not only undermines the stability of the banking sector but also becomes a significant hindrance to the progress of the nation as a whole. A loss of such magnitude is a shock that can have far-reaching consequences for economic growth, social welfare and overall national development.

3. Urgent Reforms Needed:

Urgent and comprehensive reforms are the need of the hour. Strengthening the regulatory framework, enhancing transparency and implementing accountability mechanisms are essential steps to restore the integrity of the banking sector. The call for reform is not just a response to past mistakes but a proactive strategy to strengthen the system against future vulnerabilities.

4. Responsible and transparent use of public funds:

The point is to ensure that public money is used responsibly and transparently. Misappropriation of funds is a violation of the trust placed by the public in financial institutions. Rebuilding this trust requires swift and decisive action to correct existing irregularities and implement measures that prevent recurrence.

5. Responsibility of authorities to restore confidence:

  Responsibility for taking decisive action rests with the authority. Policymakers, regulators and financial institutions must collaborate on reforms that will not only address the current financial scandals but also pave the way for a safer and more accountable banking sector. Restoring confidence in the financial system is paramount for Bangladesh’s broader economic well-being.

  Conclusion:

The Tk. 92 thousand 261 crore scam emphasizes the critical need for a paradigm shift in the governance of the banking sector in Bangladesh. The journey towards financial integrity requires a commitment to transparency, accountability and responsible financial management. Authority to correct past mistakes, strengthen the system against future vulnerabilities, and restore public confidence in banking.

Billal Hossain
Billal Hossainhttps://www.hlnews.xyz
Billal Hossain, a seasoned professional with a Master's degree in Mathematics, has built a rich and varied career as a banker, economist, and anti-money laundering expert. His journey in the financial sector has seen him in leading roles, notably in AL-Rajhi Banking Inc. in the Kingdom of Saudi Arabia and as Foreign Relations and Correspondent Maintenance Officer of Bank-AL-Bilad. Beyond the confines of traditional finance, Billal has emerged as a prominent writer and commentator, contributing thought-provoking columns and theses to various newspapers and online portals. His expertise spans a wide range of important global issues, including the complexities of economics, political dynamics, the plight of migrant workers, remittances, reserves, and other interrelated aspects. Billal brings a unique analytical perspective to his writing, combining academic rigor with practical insights gained from his banking career. His articles not only demonstrate a deep understanding of complex issues but also provide readers with informed perspectives, bridging the gap between theory and real-world application. Billal Hossain's contributions stand as a testament to his commitment to unraveling the complexities of our interconnected world, providing valuable insights that contribute to a broader and more nuanced understanding of the global economic landscape.

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