Economists and experts on Friday said that current problems of the financial sector could not be resolved without addressing the underlying political problems, as economic outcomes were connected to the country’s political settlement.

At a webinar titled ‘Eviction of Influence in the Banking Sector: Will It Alleviate the Misery?’ organised by Forum for Bangladesh Studies, experts blamed bad politics and poor governance as the root cause for severe crimes and corruption within the country’s banking sector.

Abdul Mannan, former managing director of Islami Bank, said that on January 5, 2017, he was taken by intelligence officials and coerced into signing his resignation letter.

He alleged that the resignation letter, signed under pressure, was written on an unused pad from Islami Bank, which had not been used since the bank’s establishment in 1983 up to the present year, 2024.

The controversial S Alam Group forcibly took over Islami Bank on January 5, 2017.

He said that officials from the Bangladesh Bank worked late into the night to expedite the change of ownership of Islami Bank on that very same day.

He questioned how such practices could be tolerated in a country’s banking sector, which was crucial to the economy.

Mannan also noted that in the following years, the Bangladesh Bank overturned many decisions over phone with the influential business group.

He called for actions to prevent such occurrences in the future, emphasising the need for stringent measures and supervision to ensure that similar coercive and irregular practices do not happen again.

Mannan said that independence of the Bangladesh bank was crucial to overcome the crises of the banking sector.

‘I am optimistic that if the central bank remains independent and if managing directors of banks are freed from control of board of directors, the sector could reach new heights within a year,’ he added.

Mannan, who lived seven and a half years abroad and recently returned to the country after the fall of the Awami League government on August 5, said that he was fearful whether or not he would be able to breathe freely upon his return to Bangladesh.

‘I now feel that I have the freedom to speak, but overcoming that fear will take time. I need more time to truly breathe freely,’ he said.

Mamun Rashid, chairman of Financial Excellence, said that the S Alam model had thrived in the banking sector due to deficiencies in good governance and the existing financial sector problems would not be solved without addressing the political problems

Good governance in the banking sector cannot be achieved without ensuring overall accountability throughout the country, he said.

Mamun stated that there were instances where a large amount of loans was disbursed to the S Alam Group in the morning, and by evening, the money had been siphoned out of the country through hundi.

The economist said that there were numerous allegations of large cash withdrawals from banks under S Alam’s control after banking hours, but none of these allegations were investigated.

He also alleged that a former deputy governor of the Bangladesh Bank, SK Sur Chowdhury, was responsible for facilitating influential figures in siphoning cash out of the country from the banks.

Rashed Al Mahmud Titumir, development studies department professor at the University of Dhaka, said that transparency of institutions and organisations largely depended on political settlement of the country.

He said that it was widely known that there was a huge amount of bad loans in the country but there was no scope to know the real figure due to manipulation exercised by regulatory authorities.

Titumir demanded that a forensic audit be conducted in the banking sector to know the real picture of bad loans and who were involved with the process.

Describing the state of the banking sector ‘worse than a severely ill patient,’ he said that protecting the interests of depositors and small and medium entrepreneurs should be central to the sector’s reforms and reconstruction.

‘It is crucial to establish the principle that depositors are the owners of banks. Otherwise, the aspirations of martyrs of the student-led mass uprising will not be realised,’ Titumir said.

He also emphasised the need for implementing financial sector reforms with consideration of Bangladesh’s specific context.

Titumir recommended establishing an Islamic banking wing within the Bangladesh Bank, which should operate in accordance with international standards.

Badiul Alam Majumder, secretary of Shushashoner Jonno Nagorik, held unethical politics responsible for the fraud and corruption in the banking and financial sectors.

Political motives and directives were behind the takeover of Islami Bank, as politics was serving the interests of specific groups rather than the well-being of the public, he said.

Badiul Alam mentioned that the ousted government faced a legitimacy crisis due to holding controversial elections.

Due to the legitimacy crisis, the outgoing government created crony groups, which have since taken over financial institutions, he said.

Badiul Alam mentioned that the situation would not improve unless the right leadership was elected through proper elections.