Subsidy given out to save troubled state banks, says finance minister

The government has subsidised banks to save them from financial disasters, Finance Minister AMA Muhith has said in response to critics in parliament.

The government has given out Tk 20 billion in subsidy to state banks and other financial institutions to make up for their capital deficit, according to media reports.

The amount comes from the revised budget of outgoing fiscal 2016-17. Sonali Bank, Rupali Bank and BASIC Bank have received Tk 14 billion, or 70 percent of the total fund.

Most MPs from the opposition Jatiya Party spoke against the subsidy in parliament on Thursday.

Different quarters are also critical of the government for bailing out state banks this way, which they claim are in shambles due to corrupt practices and loan forgery.

“It is being said that the government is subsidising the banks for no good reason. But we are doing so to save the sector which is currently in a vulnerable state,” Muhith said.

Jatiya Party lawmaker Nurul Islam Milon said directors are looting the banks.

Independent MP Rustom Ali Forazi lambasted the recent trend of appointing banks directors following family legacy and called on the government to stop the practice by forming a bank commission.

Echoing him, Kazi Firoze Rashid from the opposition said: “Banks have turned into family businesses. Both public and private banks are being looted.”

To these comments, Muhith highlighted the Banking Companies Act which doubles the number of directors in a bank's board from a single family and extends the tenure of shareholding directors.

“A parliamentary committee is vetting the act. We are waiting for its decision,” he said.

On a question over the necessity of having 58 banks in the country, he said the banks might be consolidated in future.