Corporate heads owning banks not conducive to healthy banking environment: Fazle Kabir

When corporate heads own banks or non-bank financial institutions, one cannot say there is a healthy environment for banking in the country, said Fazle Kabir, governor of the Bangladesh Bank and chairman of the Bangladesh Institute of Bank Management (BIBM).

Referring to neighbouring country India, the governor said, "The Reserve Bank of India does not allow corporate heads to own a bank or a non-bank financial institution. Existing corporate owners are asked to leave their positions within five years."

To ensure a healthy banking environment in India, its central bank abolished the practice in 1975, said Fazle Kabir, speaking as chief guest at the inauguration of a "Bangabandhu Corner" and the unveiling of a book on the development of the banking sector in post-independent Bangladesh, at the BIBM auditorium on Thursday.

The Business Standard was the media partner of the programme organised by BIBM.

"Many say the Bangladesh Bank has become a department of the Finance Ministry. I do not know how they can say that given the central bank has been mandated to work with the government through a coordinated council headed by the finance minister," he added.

He said, "It is included in the Bangladesh Bank Act so those who are not aware of the act toss these sorts of negative comments around, which is quite frustrating. We know what we are doing – we make policies and implement them at the grassroots levels."

Executive Director of the Institute for Inclusive Finance and Development, Mustafa K Mujeri, said there is no denying that government interference and corruption in the banking industry impacts the sector in all kinds of ways.

"How loan defaults can be minimised and overall discipline can be ensured remain a challenge. Till now, the central bank has had limitations in following independent monetary policies. It is not unusual to face some obstacles in the economy of a country like Bangladesh, but those who can overcome these difficulties can take the banking industry forward," he added.

Noting the banking sector's contribution to the country's economy, Brac Bank Managing Director and Chairman of the Association of Bankers, Bangladesh Limited, Selim RF Hussain, said if the banking sector had not been fairly effective, Bangladesh's economy may not have improved to the extent that it has.

Dutch-Bangla Bank Managing Director and CEO, Abul Kashem Md Shirin, said it was clear that in the past the boards of directors of some banks were seriously implicated in crimes committed in the banking industry. The central bank has brought changes in the banking company act, for example, where no more than four from a family can be directors of a bank.

He added that separating bank management from their boards can help alleviate problems in the industry.

Talking about the book unveiled on the occasion, BIBM Director General, Md Akhtaruzzaman, presiding over the programme, said the book is an insightful analysis of the contribution of the banking sector to the economy of Bangladesh.

The book was authored by BIBM Professors Md Nehal Ahmed, Mohammad Mohiuddin Siddique, Shah Md Ahsan Habib, and Bangladesh Financial Intelligence Unit Deputy General Manager, Md Kamal Hossain.

"We have tried to present Bangladesh's post-independence banking sector in a lucid manner so that anyone, without any banking knowledge, can understand it," said Shah Md Ahsan Habib.

Bangladesh Bank Director and former senior secretary of the finance ministry, Mahbub Ahmed, spoke on the occasion as special guest.

Among others, former Mutual Trust Bank managing director and CEO Anis A Khan, and Daily Bonik Barta Editor Dewan Hanif Mahmud spoke on the occasion.