At which stage Bangladesh’s banking sector is now?
Ehsan Khasru: Bangladesh’s banking industry is now at its third generation. The evolution in the sector has taken place in consistent with the change in clients’ demand. The demands that evolved are mainly related to three areas – SME sector, consumer products and large corporate loans.
The first generation banks focused on some selected areas, which were later unable to cope with the changes in customers’ demand. But the second generation banks in Bangladesh could not bring about any diversification in their products. The eventually became sick companies. But the subsequent changes in the banking sector helped it become a vibrant industry.
How do you spell out the banking sector’s contribution to the economy?
Bangladesh’s banking sector has a total asset of Tk400,000 crore. It has a significant contribution to the country’s GDP and is helping boost the economy. The driving forces of the country’s economy like GDP, inflation, remittance and reserves have a direct involvement with the banking sector.
Corruption in the sector will affect the country’s 16crore population directly or indirectly. While the share market fall may affect the highest 1-2crore directly and indirectly, the banking sector irregularities will impact the whole economy and the GDP growth.
What strategies a bank should follow to be successful in its business?
The banks need to be innovative while thinking business expansion. The capital management is a bank’s major task. Our main business is keeping deposits and lending money to borrowers. The banks have their own capitals too. Most of the banks mainly offer corporate loans. The proceeds from a large loan is 14% of capital money. But if the banks want to get 16%, they will have to shift capital from corporate sector to another offering the rate. For example, SME and retail loans offer such a higher rate.
Banks will not need to think of the highest return if they have a mixed asset book of the balance sheet. Banks are worried about the prolonged political turmoil as their 80% of loans are in the corporate sector. So, the eighty per cent loans of banks are at risk.
To lower the risks, the banks should prefer now SME and retail loans.
To make the Bangladeshi banks internationally competitive, what actions are required?
Economic capital framework is an essential thing here. All banks should be aware of economic capital framework and its management to reap the highest return on capital.
The banks also should bring down lending rates. We are not internationally competitive due to high lending rates which create chance for foreign funds entering the country.
The outside world knows that Bangladesh has potentials and investment ensures good returns. We see that foreign direct invest is increasing.
The banks in Bangladesh therefore need to ease interest rates on lending to be competitive against foreign financiers.
The rate of nonperforming loans in SME and retail sectors is very low compared to corporate sector loans. So, the banks should adopt their lending plans on the basis of this fact.
You have been involved with the banking industry for a long period of time. What do you think about the leadership in banking sector?
A positive attitude is one of the most important things in the leadership position. A leader has to be technology-friendly in the current settings. Introduction of online banking and the widespread use of ATM cards for transaction have made technological knowledge quite necessary. As you see frauds related with online banking and ATM transaction are increasing, having a sound command over the related technology is crucial for a person in the leadership.
The current increase in such frauds is due to lack of knowledge over the technology.
In Prime Bank, we are also focusing on enhancing efficiency to handle online banking frauds. I personally have special education on the online banking technology.
Introducing paperless banking is one of our green-friendly goals.
Does Prime Bank has any special plan for future?
We want to develop our technological side further. We are going to bring a new credit card system from Japan Credit Bureau. We have already signed with the JCB, and this will be the fourth type of credit card in Bangladesh.
Prime Bank also has a long-term strategic plan. We will administer at least four types of banking separately – Sharia-based corporate, retail and SME. All of them will be separate banks under the name of Prime Bank. They will have different managing directors and prepare different balance sheets. There will four MDs and one group CEO. We are focusing on separation on the basis of banking types. I think it’s possible, and we are working on it.
Prime Bank is a large bank in the country, and my goal is to make it the safest bank by 2014.