It contributes 7.38 pc to GDP
Abu Sazzad: Experts expressed their deep concern for declining the growth of the financial sector affecting expansion of the private sector and employment generation in the country.
However, the contribution of financial sector to GDP (gross domestic product) has dropped by 0.52 percent to 7.38 percent in last FY.
According to Bangladesh Bureau of Statistics (BBS), the growth rate of the banks (monetary intermediation) sub-sector has declined the highest by the percentage point 1.13 to 7.38 in FY 19 from that of 8.51 percent in FY 18.
Experts said, irregularities and problems of various natures in the country’s banking and financial sector have hit its growth. The government has failed to properly handle the financial sector which is threatening the overall success. Actually, the banking sector playing a vital role for the overall economic development of Bangladesh, but the sector is faced with multifarious challenges including weak management, poor governance, lack of strong leadership, and non-compliance with ethical standards leading to various types of banking scams such as money laundering and Non-Performing Loans (NPLs).
Former Bangladesh Bank governor Salehuddin Ahmed said that the banking sector failed to recover from its disastrous position in the outgoing financial year with problems remaining unsolved, no improvement in governance and continued high rate of corruption and writing-off of bad loans.
He termed the year-on-year growth of insurance and other financial auxiliaries sub-sectors “unusual”. They also questioned how those could expand amid the poor performance of banking sector.
Apart from the banking sector, the capital market is failing to gain trust of the investors due to poor regulatory framework; he said adding that the overseas investor withdraws money from capital market which is another failure of the financial sector
Distinguish Fellow of the Centre for Policy Dialogue (CPD) Dr Debapriya Bhattacharya said growth rate of the financial sector might even drop further, if the NPL provisioning method is followed perfectly.
“I think the state of the country’s financial sector is much vulnerable than it is reflected in the BBS data. If the NPL provisioning method is made perfect, the real banking profit will fall further, and its growth will also plunge.”
If the higher volume of NPL continues, the banks’ paid-up capital will be affected, and they will suddenly fall, he added.
He said that the recent scams, irregularities, and people’s mistrust on financial institutions severely affected growth of the sector. The country’s financial sector, especially the banks, has been experiencing hard times with the highest amount of NPLs, poor private sector credit growth, lower net profit, provisioning of the highest amount of classified and non-classified loans, the Bangladesh Bank’s (BB) reserve heist, and liquidity crisis etc.
The country’s banking and financial sector has been hit hard, as its private sector credit growth has dropped, non-performing loans (NPLs) have been rising, and profit shrinking.