The World Bank has intended to evaluate the asset quality of four state-owned banks in Bangladesh, with a particular focus on the scam-hit Janata Bank, using international audit firms.
The three other state-owned banks are Sonali Bank, Rupali Bank and Agrani Bank.
Two foreign audit firms, recommended by both the World Bank and the Asian Development Bank, have already begun auditing six private commercial banks, with plans for such audit for another six banks in the second phase.
According to Bangladesh Bank officials, the World Bank has now expressed strong interest in assessing the financial health of the banks through international audit firms to uncover their true financial health.
BB governor Ahsan H Mansur also supports bringing foreign chartered accountants for this task. However, there is scepticism about whether the finance ministry will allow such foreign audits on the government-owned banks.
A senior official of the Financial Institutions Division of the finance ministry told 抖阴精品 that the World Bank demanded forensic audit of four state-run banks.
鈥榃e are in negotiations, and no decision has so far been made in this regard,鈥� the official said.
Ministry officials are highly reluctant to approve such forensic audits due to their direct involvement in the state-run banks鈥� activities, including the appointment and removal of their boards of directors, according to Bangladesh Bank officials.
They noted that a forensic audit could potentially expose serious scams involving these banks, which could bring their involvement into the spotlight.
Zahid Hussain, former lead economist of the World Bank鈥檚 Dhaka office, told 抖阴精品 that the forensic audit would reveal the full extent of the financial troubles facing the state-run banks and identify the root causes of their problems.
He emphasised that the findings would not only diagnose the current issues but also help prevent future obstacles.
He also said that there were no reasons for the Financial Institutions Division to reject the forensic audit of these banks.
Zahid noted that the asset quality and liquidity of these banks had severely deteriorated, with non-performing loans surpassing 50 per cent.
鈥榃hen asset quality deteriorates to such an extent, a special audit is essential to uncover the underlying crisis,鈥� he said.
As both the owner and regulator of these state-run banks, the FID鈥檚 role in the ongoing irregularities is critical, he said.
Zahid observed that it was highly unlikely these banks could have continued such massive irregularities without FID鈥檚 knowledge or consent. Consequently, the FID might be reluctant to appoint foreign audit firms to examine these institutions, he said.
Two global audit firms, Ernst & Young and KPMG, are already conducting asset quality evaluations for six private banks plagued by financial irregularities and corruption.
These audits, initiated at the suggestion of the World Bank and the Asian Development Bank, aim to restore transparency and accountability in the banking sector.
The six banks under review are First Security Islami Bank, Exim Bank, Global Islami Bank, Social Islami Bank, ICB Islamic Bank and Union Bank.
Ernst & Young is handling the audits of Global Islami Bank, Social Islami Bank and ICB Islamic Bank, while KPMG is auditing First Security Islami Bank, Exim Bank and Union Bank.
The forensic audits are expected to assess the financial health of the banks and guide decisions on whether to liquidate, merge, or inject bailouts for their continued operation.
Now, the foreign lenders are pushing for similar forensic audits of the four state-run banks.
Foreign lenders suspect significant fund diversions from these state-run banks.
Janata Bank, in particular, is under severe stress, with a staggering Tk 60,489 crore in non-performing loans as of June 2024, representing 61 per cent of its total loans.
Major borrowers like Beximco Group and S Alam Group withdrew Tk聽24,682 crore and Tk 10,100 crore respectively from the bank, much of which has turned into defaulted loans.
Agrani Bank鈥檚 total non-performing loans escalated to Tk 26,891 crore in September, with the top 10 defaulters accounting for 30.95 per cent of this amount.
The amount of defaulted loans of Rupali Bank also soared to Tk 12,738 crore and that of Sonali Bank to Tk聽16,623 crore at the end of September 2024.
During the Awami League regime which was ousted on August 5, 2024 amid a mass uprising, substantial amounts of public funds were reportedly withdrawn from the banking sector and laundered abroad.
Following the political transition, the interim government restructured the boards of a number of private banks, removing the influence of the S Alam Group and other politically connected entities.
