The rot in the banking sector started in 2017, when Bangladesh Bank (BB) allowed a large industrial group to fully control a large private bank in the country, according to  the Association of Bankers, Bangladesh (ABB) Chairman Selim RF Hussain.

Banker Selim said this to journalists through a virtual platform on Tuesday. The situation was not that bad before. Basically, the central bank itself has gone on the path of compromise to give benefits to Chattogram-based special groups, he opined.

Although he didn't mention them by name, it is understood he was talking about the Chattogram-based S Alam Group's takeover of Islami Bank.

In 2017, the Awami League government took the initiative to make Islami Bank 'Jamaat-e-Islami free' as a political decision. The S Alam Group, close to the outgoing Awami League government, then took control of the bank's ownership and management using a Defense Intelligence Agency. Now one-third of the bank's loans are owned by the group interests, said the chairman of the ABB, an association of bank owners and managing directors.

Asked what kind of measures should be taken in the case of the Shariah-based banks faced with liquidity crisis, Hussain said in response, "As far as I understand, initially the chairman and board of these banks will be restructured to stabilize the banks. Already their creditworthiness has been reduced."

He said that when the problem first arose in these banks, it was necessary to identify it quickly and bring it under restrictions. The central bank did not do that and kept them alive with money supply, the country has suffered a great loss. Now the responsibility of coming out of this difficult situation has fallen on the shoulders of the new government, he said.

Journalists wanted to know what would be the effect if the banks are closed. ABB chairman said, “In Bangladesh, it was said that no bank was allowed to close. But in a market economy, if a bank goes bad, it should be allowed to close. Many banks have been mismanaged in the last 10 years. By letting them die naturally, people would know where to put their money safely.”

He also said there are systemic problems in the country's banking sector. About 70 percent of the parliamentarians of the previous government were associated with business groups. As a result, they made all laws in their favour.

Citing a former governor, Hussain said, “The entrepreneurs of the banking sector in the country are big businessmen. This (their involvement in politics as MPs) creates a major conflict of interest. These must be stopped now.”