• Sunday, Sep 27, 2020
  • Last Update : 10:48 pm

'Govt should consider lowering corporate tax rate for banks'

  • Published at 05:14 pm May 18th, 2020
Ali Reza Iftekhar
Ali Reza Iftekhar

The government should consider lowering the corporate tax rate for banks so that they can get through the financial crisis brought on by the coronavirus pandemic. Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh (ABB), also the Managing Director and CEO of Eastern Bank, said this in an interview with Dhaka Tribune's Mehedi Hasan.

He also talked about current banking services amid the pandemic, the upcoming budget, and the challenges of implementing stimulus packages through banking channels.

How has customer transaction behaviour changed in the pandemic?

Banks invested in digital banking before the pandemic but the Covid-19 situation proved that we should take more initiatives.  Digital equipment would be essential in future banking. Every bank will have to establish a digital ecosystem and a technical solution.

Covid-19 taught us the need to increase a "paperless" culture.

What are your demands for the banking sector in the upcoming budget?

Government has a 37.5% corporate tax on banks. This year they should reduce it so that we can survive the crisis stemming from Covid-19.

There should be a greater budget allocation for stimulus packages, at least until next year, as we do not know the true impact of the crisis on the economy and how long this will continue.

Is the banking sector facing a liquidity shortage in this crisis? 

Overall, the sector has no liquidity threat but there is some mismatch. The liquidity positions of some banks are weak, while others remain strong.  However, banks are now facing cash withdrawal pressure owing to panicking depositors amid the pandemic.

What challenges are there in implementing the government's stimulus packages of over Tk1,00,000 crore?

Submitting documentation is the main challenge to implementing the packages. If borrowers could submit the required documents as soon as possible, we could disburse the funds quickly. We have already begun disbursing funds from two or three packages.

Will suspension of interest collection affect bank profits?

The central bank instructed banks to suspend interest collection from April and May and it would have to be transferred to interest-free blocked accounts until further notice. Bangladesh Bank did not instruct us to waive the interest.  If the central bank waived the interest for those two months, it would badly affect the profitability of banks and shrink liquidity.

We hope the government and the central bank will take the issue seriously, because interest is the main source of income for banks. We are waiting for further instructions from Bangladesh Bank.

Many depositors cannot pay monthly installments of DPS (Deposit Pension Schemes) during this crisis. Have you exempted any late fines on DPS?

We, Eastern Bank Ltd, will not impose a fine if our DPS clients are not able to pay their installments in this crisis. I hope all banks will follow suit as well.

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