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The move of the Chittagong-based S Alam Group, by resorting to ‘nasty steps’, in the words of the finance minister Abul Ma’al Abdul Muhith, to tighten its grip over banking in the private sector is highly likely to portend ill for the national economy.
And the finance minister’s seeking a report on the group’s engagement in private-sector banking from the financial institutions division has also, worryingly, been a delayed response. The S Alam Group, which has already had, directly or indirectly through people having link to the group, its control over at least five banks, including First Security Islami Bank, Al-Arafah Islami Bank, Union Bank, Bangladesh Commerce Bank and NRB Global Bank, has already tightened its grip on Islami Bank Bangladesh and ‘took over’, on October 30, Social Islami Bank Limited by buying 40 per cent of the bank’s share.
It is worth noting that the finance minister has described such various steps of the group as ‘nasty’ and has sought the financial institutions division report on the group, yet the minister is not reported to have lifted a finger against the Bangladesh Bank’s approval of the Social Islami Bank’s share purchase by the group although the finance ministry has always been known not to have listened to what the central bank has said.
The monopoly as it looms large in the case of the S Alam Group’s increased control over a significant number of banks can be bad because of profit-maximising activities which will only hurt society. In such a situation of impending monopoly, the government needs to align private profit-making incentives with incentives of society.
One way of doing this is to ensure competition in the private sector to align business interests with the interests of the public, who buy the services. The government has already failed in what could lead a way out of this. The finance minister has now stressed the need for making functional the Competition Commission, which has so far given a short shrift understandably because of the clout that businesses in the private sector enjoy.
Profits in the private-sector cannot now be competed away, which will put the national economy in jeopardy. If competition is not ensured, then private sector needs to be regulated so that it cannot irrationally exploit its market power. But then again, this is a kind of compromise solution. Yet, the government has also failed to do this in a situation where almost all big business powers enjoy political clout of some sort.
The government, under the circumstances, must immediately rethink its approvals of so many banks being aligned to a single entity, which entails the risk of a monopoly in banking in the private sector. And if it is not possible for the government at this point, it must effect a merger of all the banks into a single entity or two so that they cannot hold the national economy hostage.