Tuesday, April 10, 2012

On new Banks and more Universities

As I See It Column
The Independent
March 31, 2012
M. Serajul Islam

A young member of parliament on a popular TV talk show said something astounding on the permission that the Government has given to establish a number of private universities. He said that permission has been given to one applicant who cannot even sign his name! He did not name the individual but he assured viewers that in due time he would reveal it. 

In the same talk show, the permission being given to a number of new banks was also discussed. I was pleasantly surprised to hear a ruling party MP criticize the issue. He said that to his knowledge, those who applied are not in a position to raise the minimum of hundreds of crores of Taka necessary up front to establish a Bank these days. He was apprehensive that the sponsor Directors of these new Banks would loan money, using political influence, from the nationalized Banks that in turn would take public money away for benefit for a few individuals with little of banking credentials but a lot of political influence. 

I can guess why certain politically connected individuals would be so interested to be sponsor directors of private banks. By investing a pittance, sponsor directors in the past have minted fabulous amounts. It is not that they just minted money; even their behaviour pattern has been affected by the money they have made. When these sponsor directors address their bank officials, they address them like they are royalty and the bank officials, serfs! They insist and their employees oblige for fear of their jobs that they be addressed as “Hon’ble Directors”!  

Nevertheless, these private banks have played a great role in the economic miracle of Bangladesh. Bangladesh’s RMG sector has emerged because of the financial backing they have received from these private banks. However, the private banks are already over numbered and the sector, over saturated. In fact, if the Bangladesh Bank would impose the strict regulations, a good number of the existing banks would go under the water because their fundamentals are wrong. They are surviving by managing and juggling their accounts by many tricks available with the regulatory authority  under political pressure or otherwise to overlook their violations of banking regulations. The BNP’s statement not too long ago that some banks could fail was not entirely baseless. 

Added to this poor health of the private banks, the pool of officers required at run banks at managements levels are limited and existing banks are in shortage of quality officers. An interesting phenomenon of the private banks in Bangladesh is the regular movement of officers at management levels from one bank to another by lures of pay and other perks. One has to wonder from where the new banks would get the senior officers they would require to operate successfully. 

The phenomenal development in the banking sector in terms of technology has allowed banks to offer services to the clients more efficiently with less manpower and without reaching out to them in the physical sense. In other words the banking sector is not really in need of more new banks for better service. In fact, what is more necessary is to consolidate the existing banks by  amalgamation of those banks  whose fundamentals are still weak and  surviving by managing things in a manner that are neither transparent nor legal. The new banks that the government will bring to the banking sector will weaken these banks and make them susceptible to collapse and create a situation that could be dangerous for the economy and the image of the country. 

Clearly, the names that have come in the media on the applicants for the new banks do not increase anybody’s confidence. The other very important point here is the fact that it would not be as easy for the sponsor Directors of these new banks to become rich as the sponsors of the first and second generation banks have been. Those using their political influence to get the government’s permission for establishing new banks may face a rude shock when they get down to operations. There is great risk; their efforts could end in failure and with that, the money of the people who would be depositing/investing money in their banks. Even the better banks of the country are currently going through a very difficult phase. Their managers running from pillar to post chasing deposits like their lives depended on it. 

Then of course there is the public perception that the money that has vanished from the share market, money of hundreds of thousands of small investors who were cheated in the share market scam would find its way into these new banks.  The perception is not something wishful because the fate of the thousands of crores of money that has been skimmed off from the share market has never been found although a committee set by the government did name a few individuals who the report said were responsible for the scam. If this perception is true, then on the point of ethics, the new private banks would always remain suspect. 

It is general knowledge in the banking sector that Bangladesh Bank opposed the proposal for new banks seriously. The Bangladesh Bank Governor tried his best to oppose the Finance Minister who wanted the proposal to go through. In the end, it is not economics or banking needs that has won. The proposal for new banks got through for reasons of politics. Given the ugly nature of our politics, one has to be apprehensive about the impact that these new banks would have on the economy. Where the first and second generation banks have helped the economy, the third generation banks, because they are being given for political reasons,  could have an impact on the banking sector that it could very well do without. 

Politics that helps resolve conflicts in other countries to develop has been the bane of our development efforts. Without the type of politics that we have witnessed in the last four decades of our independence, we would have by now achieved a great deal more than what we have. The political culture that is now a common topic of discussion everywhere in the country, by common acknowledgement, has hit a nadir.  

This political culture reflects no tolerance to opposing views and no respect for anyone else except one’s own needs and interests. Greed is another characteristic that our present political culture reflects. It is this culture that has led to the Government to give permission to set up new banks. It is again this culture that has been the key factor for permitting the new private universities. Like in the banking sector, the need of the moment is to close a number of the existing universities. Giving permission for new ones would be giving incentive to business of making money ahead of the needs of education. 

It is open secret these days that a lot of private universities sell degrees. Darul Ahsan University has done this right under the nose of both the BNP and AL governments. Even the best private universities run from a pool of teaching staff and only a few can claim to have a teaching staff of its own. The new private universities would be established in places far from Dhaka. Where would they find the teaching staff? If the objective of the government is to give every district of the country a private university that in the Pakistan days did not have even a good college, then it can be congratulated. But sadly the truth is that these new universities would not be able to compare with the private colleges of those days.   

Not long ago, the University Grants Commission that regulates the private universities had voiced concerns about many of the existing universities. It seems the authority of the UGC has been taken over by the needs of politics and the greed of politically connected people. The young parliamentarian now has a national duty to reveal the name of the illiterate person who will now own a private university.  

The writer is a former Ambassador to Japan.


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