The Easiest Way to Establish a Bank: Try Bangladesh

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The Easiest way to establish a Bank: Try Bangladesh!

Banks are essential for any economy now a days, an economic needs and financial services to the businesses are the main driving forces that determine how many banks and financial institutions would be there in a country. In a raw way to say, macro economic demands would automatically identify the needs for a bank or types of financial institutions in a country. Whatever way to clarify- this is an economic matter and reason for setting up of banks and financial institutions, which should be decided by Bangladesh Bank. But this is not the case in Bangladesh, where Government openly declares, for political reasons and pressures banks can be established. Bankers around the world would be surprised to swallow this message or news. But in Bangladesh- people call it- a country of ‘everything is possible’. Well, no one surprised or questioning the legitimacy of this government decision, as this is a government which came to power with a sheer majority, and hence, look down upon every other consents and opinions. Behaving like we hold the majority and we will run the country for five years whatever way we like, and whatever contract we like to sign- who are you to raise a finger at us! If you do, be ready for sue, harassments and jail, sometimes.

However, Bangladesh Bank (BB) had no other way but to rectify its rules and regulations regarding establishment of new banks lately. But yet, they are in trouble in doing so, as this is not a matter of one shot game, rules and regulations will go for a long time. Among the preconditions, some are crucial in terms of sources of capital, which are as follows:

Mandatory-criteria i. for any new banks at least 400,00,00,000/-Taka must be kept with Bangladesh Bank as Reserved Capital. 

Criteria ii. The National Board of Revenue (NBR) must approve the above capital, i.e., properly taxes have to be paid on that capital, no black money.

Criteria iii. There must not be any dispute or lawsuit that are unsettled yet or pending to be resolved.

Since in Bangladesh economy is fundamentally based on black money, Government is in a delicate situation what to do with it, as the ministers, secretaries and big officios are also stakeholders in that. That is why when NBR presses up to have everything white and clean, stock exchanges collapses! Why not regulatory bodies can do anything? Answer is who will bell the cat?

Now the BB is under pressure from the Government, Finance ministry and political stakeholders who are interested to go on to withdraw the criteria, that hindrances on their way to setting up of Banks. These rules were made by BB experts, who are also under the ‘burning eyes’ of the ruling Awami party politicians. BB’s opinion is they are interested to have an international standard practicing, even though Bangladesh is following more relaxed policy and regulations even if compared with India.

For example, in India for criteria I, the reserve fund must have to be 500 crore rupees, i.e., 100 crore rupees more. In Pakistan it is 800 crore rupees.

Currency conversion should be remembered here- 100 Indian rupee= 65tk.

Now one could ask who are these interested parties?

They are mainly leaders (!) from different Government party wings and its stakeholders. At the beginning of clinching power these people began their efforts in applying for the set up, and invested already in having their offices and secretariats.

After declaring the new Criteria on the 14th and 27th September 2011, no one dared to apply for setting up of banks, as white money required!

World Bank representatives reported already, Bangladesh has more banks that it needed for its economy. The existing banks are already facing problems too for this. International Monetary Fund also expressed their stands against establishing new banks. It further added the most urgently needed task is rectification of various obsolete and unnecessary rules of the Company Act, and strengthening BB’s regulatory authority.

This is the time to see what is important for the Awami Government- Economy or Party lobbyists!

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