Two stories caught the reader's attention in last week's media. One was the jailing of marginalized farmers for loan defaulting. About 12 such farmers were put behind bars in Jashor for this crime. The other was the High Court directive to the Anti-Corruption Commission (ACC) to complete the investigation into the Basic Bank loan scam cases and submit the report to the concerned lower court within three months "without fail". The reality of Bangladesh's financial sector can be recognized in these two news best.
After the media covered the news of the jailed farmers there was an uproar and the Pabna court granted bail to 37 farmers including the 12 arrested.
Bangladesh Samabaya Bank had given loans of Tk 25,000-40,000 each to 37 farmers in 2016. However, it remained unpaid till 2021 when the bank filed cases against the 37 on loan default charges. Arrest warrants were issued on 23 November and the 12 were arrested on 25 November. This version is of the bank.
The farmers and their families however said that the loan had been paid but the money was not deposited with the Bank as the officials concerned were dishonest and stole it for themselves. For the moment, the farmers are out on bail.
And the rich defaulter?
The other story concerns the Basic Bank which has looted crores from depositors. The case is with the ACC but it hasn't moved. The owners are free and abroad and the case continues to be investigated for several years. It has finally reached such a point that even the HC has lost its cool and things move pretty slowly anyway. It has now said that if the ACC does not submit the investigation report in three months from the order, legal action will be taken against the ACC.
"The court said there is no scope for taking the allegation of money laundering leniently. The HC bench expressed utter dismay at the incidents of embezzlement of huge amounts of money from Basic Bank and the ACC's failure to submit a charge sheet of any of the 56 cases filed over the bank's loan scams in the last seven years. The HC issued three rules on different dates in 2020 and 2021. According to a Bangladesh Bank enquiry, around Tk 4,500 crore was siphoned out of state-owned Basic Bank between 2009 and 2013 when Sheikh Abdul Hye Bacchu chaired the board of the bank." (The Daily Star 28 December 2022).
Meanwhile Islami bank has gone ahead of the lot with several billions of taka of false loans which has become the biggest scandal of the week. The HC has asked the complaints to file Writ. It's decidedly surreal.
Should we be shocked?
That is the whole point. This is very normal and common in Bangladesh. It's not considered corruption in the banking sector anymore but "informal" methods of wealth making. And it's all-pervasive. The reason it's so is because the formal part of the state system proclaims to be so but operates with an informal framework. The content of formality and system development is low because there is no need or demand for the same by the financial institutions. Hence corruption is not about good or bad loans but how much one can consume and get away.
Are banks dead then?
It's tough to argue that they are alive because if one goes by the conventional definition of a bank they could be largely so. The best indicator of public perceptions of banks can be traced in the following:
Almost all banks are considered to be filled with dishonest sponsors and personnel and most loan seekers think they will have to pay their way to get a loan.
Most banks have massive cases of default loans caused by deliberately signing off such transactions mostly through bribes and also pressure from political quarters.
Several banks have gone kaput including those run by politically connected people with depositors losing their money.
Depositors really don't have much choice hence they keep the money in banks and few banks have gained a brand that people trust. A few are but that's a huge minority. The defaulters are many and some take loans knowing they can bribe their way out.
Given that scene, it's difficult to argue that the banking sector is really a financial sector meant to accept deposits, keep them safe and grant loans on their own merit. Thus, a sense of anxiety haunts depositors constantly. So a recent incident when an expat anti-government activist told people to withdraw money from banks, many did. It's because they trust him more than they trust their own banks. So when such a situation exists, it's obvious that banks are already comatose. Once more it becomes obvious that formal institutions can't survive in Bangladesh.
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