Is net interest spread in the banking sector under control?
Interest rate spread of our bank is now below 4%. But there are some eight banks whose interest rate spread is still at a high level, even though Bangladesh Bank has set some regulations in this regard.
We have reduced the interest spread, but those banks are not complying with the central bank’s directives, causing an abnormal competition in the banking sector. The regulatory authorities should therefore take steps in this connection, as the banks are not reducing their interest spread to a reasonable level.
Tell us something about private banks’ investments in development projects.
We [private banks] hold 70% of the total market share, while state-run banks have only 30% of share. Yet, the state-run banks are the big players and can make huge investments in governmental projects as they have huge amounts of capital and liquidity, even though they are continuously incurring financial losses. Also, they have enough exposure. So, they have the capacity to provide big amounts of loans for development projects.
Does Standard Bank Ltd invest in any project?
We have already made several big investments in different sectors. For example, we have invested Tk350 crore in construction of an eight-kilometer approach road of the Karnaphuli Bridge, which is known as Karnaphuli Approach Road. Standard Bank has also invested in several power plant projects across the country.
Do local and foreign investments depend solely on interest rates?
Investment depends not only on interest rates of bank loans, but on several other factors. In addition to interest rates, law and order situations and a business-friendly environment play a vital role in this regard. Investors are not inclined to invest their money when they feel that there is a risk of corruption in investment opportunities.
Many allegations of corruption in the banking sector have surfaced in recent years. Tell us something about corruption scenarios in private banks.
The issues of anomalies and loan defaults in private banks are insignificant compared with those of state-run banks. Irregularities or loan defaults in the private sector have not been reported as yet.
Why is Bangladesh Bank worried about a 17% rise in receipt of consumer credit?
Clients are increasingly taking out consumer credit from banks. They are taking out such credits products for personal purposes, such as building house and buying cars.
The central bank is really worried about the rise in their numbers, and it wants to unearth the causes of the increase in receipt of consumer credit products. Moreover, the issue has recently been discussed during a meeting of the bank.
However, it is obviously positive for economy. Because when the purchasing capacity of the people increases, it improves reputation of banks and financial institutions.
Suppose a person is financially solvent, so he or she will definitely want to take out loans from commercial banks to buy luxury items, such as cars, televisions and refrigerators. They might also seek loans to buy flats or land or furniture.
We examine our clients with due diligence before lending money to them for purchasing such items.
According to media reports, purchasing power of the masses has increased in recent years. What do you think?
The people’s purchasing capacity has increased in the last couple of years. Consumer credit products can contribute to the growth and strengthening of local industries if clients take loans from commercial banks to buy an apartment or construct a home.
But, the local industries cannot improve their production capacity, and incur huge losses when people spend their money on buying cars, as the cars are not manufactured in the country.
What measures have you taken to improve cyber security system of your bank?
We update our IT system on a regular basis so as to ensure security of our firewall against possible incidents of cyber hacking. Besides, we are buying new firewalls to protect our computers, as the department concerned of Bangladesh Bank has directed us to update our cyber security system.
Why are more and more people seeking to take out consumer credit?
Disbursement of consumer credit is witnessing an upward spiral, as the people’s purchasing power has noticeably increased in the last few years. People want to improve their standard of living. Therefore, they are spending money on buying cars, flats and other luxury items.
Our purchasing power will increase even further, as Bangladesh is on the track to achieve its vision of reaching middle income status by 2021.
There is a positive impact on GDP growth when consumer products are manufactured in the country. Imported products do not contribute to economic growth as such.
Do you believe high interest rates are a major barrier to investment in the country?
As I mentioned earlier, potential investors look not only at interest rates, but they assess law and order situations, infrastructural facilities, and the provision of utility services before making investments. They also consider the marketability of their products.
Investors will require an uninterrupted supply of electricity and gas to their factories.