'New banks are suffering because of Farmer's Bank debacle'

Speaking to Dhaka Tribune's Shariful Islam in an exclusive interview, the Chairman of South Bangla Agriculture and Commerce (SBAC) Bank Ltd SM Amzad Hossain talks about the challenges, possibilities, and current situation of new banks in the private sector.You are both a bank director and an industrialist. As we can see, the industrialists want credit with lesser rates of interest, while bank owners have a policy of giving high dividends to their depositors and shareholders. How do you deal with both demands at the same time? This is actually quite a tough matter to deal with. A businessman has to compete globally, so if the credit interest is high, the cost of production will increase and that will make a businessman's survival in the market hard. On the other hand, depositors have to maintain their living costs with the money they receive as interest against their deposits. Thus, if the deposit interest is decreased in a bid to reduce lending interest rate, depositors will stop making deposits in the banks. If that happens, business entrepreneurs will become the ultimate sufferers. From my point of view, while keeping a standard deposit interest rate, the lending rate of banks should be reduced for greater industrialization and economic development in the country. The capital market should be redesigned with a view to reinstate the investors' confidence and trust in the market. If transparency and accountability are ensured in the capital market sector, the investors will invest more, from which business can borrow in lieu of banks.The government has recently passed the Banking Companies Act 2018 amid bankers and economists protesting against the increased tenures of private banks' board of directors, and also against the policy of allowing four members of a family to sit on a board instead of two. What are your opinions on this matter? I think the amendment has no new advantages or disadvantages. Do you really think 39 bank owners are going to put their families in the board to loot the banks? You will not even find 5 bank owners who have four children. Also, why can a director not hold his post for nine years if he is capable of conducting his duties? He has invested more than Tk20 crores to become a board director. Would you rather ask me to make a shareholder, who has invested Tk100 in the bank, as the bank director? We have already tried electing independent directors. But most of the times, since he does not have any stake on the bank, he will reap such benefits as commissioning from clients against loan sanctions and recruiting workforce. I think the amendment was logical. The act should have been amended a long time ago.As a bank entrepreneur, tell us about the current status of banking business in the country.I have been in the banking sector for almost five years. My experience tells me that the banking sector is passing through crucial times. Private commercial banks are suffering from liquidity crisis, which has led the country's business sector to be in peril. I do not have any more comments regarding this matter.New banks are facing challenges while conducting business. Default loans have been increased at an alarming rate. Your bank is also a new one. What do you think are the reasons behind the crisis?We are regulating the banks according to the Banking Companies Act, where the duties of the board of directors have been chalked out. According to the law, the board of directors is formed with an aim to formulate policy guidelines, supervise business activities of banks efficiently, and ensure good governance while managing banks. My bank is just following the law. On the other hand, the banks who are getting hit by scams are basically being affected by the interference of the board in management issues. Not all new banks are bad. However, if one bank gets an ill-reputation, it affects the others. For example, new banks are getting a bad name because of the Farmer's Bank. Depositors do not want to deposit money in our banks because they think we will not be able to protect their money, or pay against their cheques. They also withdraw their deposits from new banks. But in truth, it is for the misdoings of 2-3 new banks that the whole private sector is suffering. We have to explain to the clients that not all banks are bad. My bank, for example, is doing good business and we are making profits by capitalizing the deposits.Do you think the regulatory body is negligent about the on-going crisis?Bangladesh Bank, as the regulatory body, is obviously responsible for the crisis. If the central bank had followed strict regulations, the scam-riddled banks would not have been scammed, and we would not have been affected with a bad reputation. The central bank should examine all banks with the same standards in terms of inspection and audit. There should not be any flexibility for anyone.Some crisis-hit bank owners are now willing to merge their banks with healthy banks. What is your stance on this issue? I do not understand this merger policy. If it means that by being the owner of a good bank, I will have to take charge of a bank of ill-repute, then certainly I will not do it. As a commerce student, I can say that a company never dies. The failing banks can wind up through legal proceedings, and a bank that is on the verge of dying can reform its management board or change its name altogether. I think there are no other alternatives.