Muhith warns of widespread use of black money in election year

With less than a year to the national election, Finance Minister AMA Muhith has warned banks and the regulator of a widespread use of ‘black money’.

Speaking at a conference of state-owned Rupali Bank on Sunday, he said the advance to deposit ratio or ADR in the banks is higher, which needs to be contained.

ADR measures loans as a percentage of deposits.

ADR rose to 78.9 percent in September from 78.2 percent in June 2017, according to central bank data.

“Bangladesh Bank is responsible for checking it. This year, they need to be extra-cautious, as it’s an election year. The cash flow will increase and a good amount of black money will circulate,” Muhith.

On criticisms over the ‘weak’ banking sector, the minister claimed it was somewhat better now. “Economic development would not have been possible with a weak banking system.”

Underscoring default loans as the biggest problem, Muhith said the situation has “significantly improved” as default loans have come down to 11.5 percent in the state-owned banks from more than 50 percent earlier.

Responding to Rupali Bank’s plea to raise its paid-up capital to Tk 9 billion from the Tk 3 billion now, Muhith said ‘good news’ could be expected in the next budget.

“A significant amount is allocated for banks in the budget every year. Some say that should not be the case, but I don’t agree. We cannot afford a catastrophe in banking.”

Urging banks to focus more on SMEs, Muhith said they account for 75 percent of the manufacturing sector.

“SME development means more jobs will be created, which means development of the people.”