Page 34 - IBT Sept 2021 (1)

Banking Sector

By Marjiya Baktyer Ahmed September 2021

The difference between the lending rates Banks maintained a capital adequacy ratio (CAR) of budgetary needs. Now that the loans are be a convenient and reliable means to settle securiti
and the deposit rates, widened over the 11.60 percent last year, way less than 18.6 percent in rescheduled, they are making profits and transactions. The investor has been freed from the ha
last several months – what is the objective Pakistan, 16.5 percent in Sri Lanka, and 15.8 percent in announcing dividends and paying taxes, in that physical handling of certificates, errors in paperwor
behind this widening and how will the India indicating a poor financial health. How can this way it is healthy. risks associated with damaged, lost and forged certif
inflation rate of 5.64 percent affect be improved?
depositors going forward? It is extremely important for a bank’s capital to be as high as The Bangladesh stock market holds Following from this successful venture, and as part o
I have been a witness to this endeavour ushered possible. Historically, when banks made a profit they gave a opportunities for investors looking for continuous modernization and increment in capacity of
in by the Honorable Prime Minister and also the lot of it away in the form of cash dividend. It should have been diversification - how can this be leveraged capital market in Bangladesh, the market authority an
Minister for Finance at that time, Mr. Abul Maal a policy to give 50% cash and 50% stock dividend. Every year, to encourage Foreign Direct Investment? relevant stakeholders took different initiatives such

modernization and demutualisation of stock exchanges
Abdul Muhit, followed by his successor Mr.

Our stock market has always been very shallow.
the banks can increase their capital base by giving stock
Counting A.H.M. Mustafa Kamal, FCA, MP. They wanted to dividends. As a bank’s balance-sheet size increases, it needs to First of all, not enough Bangladeshi companies Exchange Commission has promulgated the Clearing &
raft of other such measures. The Bangladesh Securitie

see single digit interest figures in the country’s
are listed on the stock exchanges. There are
add fresh capital and/or opt for rights share issues where

Settlement Rules, 2017 to form a Central Counterparty
banking sector, which I have wholeheartedly
possible. Shareholders are now unable to put in additional
many enterprises in Bangladesh which can float

in Bangladesh. Under the said rules, a company has al
supported over the years. In Scandinavian
their shares on the stock market and share the
capital required, as the base has progressively gone up over

been incorporated in the name and style of Central
countries, banks deduct money from customer
the years. It is difficult for the original shareholders to

fruits of their hard work with the general

Our Blessings accounts for maintaining them – there is no economically and financially pay so much money to add to the public, which contributes to better economic Counterparty Bangladesh Limited (CCBL) in January 201
shareholding of the company is held by Dhaka Stock
interest paid. In The Netherlands, if you put your
development of the people and the country.

paid-up capital through rights share issues. Therefore,

Exchange Limited (DSE), Chittagong Stock Exchange Lim
money in the bank, the bank will give you only
When you float your company, investment
companies need infusion of capital from external sources and

(CSE), Central Depository Bangladesh Limited (CDBL),
0.02% to 0.60% per year. In those countries you
they have to be careful where they get it from. I worked with a

multiplies and you are able to get back a part

can also take home loans for an interest of 6-7%.
investor (to be introduced)
Large companies depending on their commercial number of sources for injecting fresh capital into Mutual Trust from the stock market, and an investor can then banks and a strategic
expand into a new enterprise. This is how the

Bank Limited (MTB) over a period of many years, and finally,

strength, can borrow at an interest rate range of we got Norfund – The Norwegian Investment Fund for economy grows through the stock market. You CCBL is planning to
4%-5%. In those countries, the general populace Developing Countries, owned and funded by the Norwegian share the wealth along with the people and also implement a state-of-the-ar
CCP System to manage the
Anis A. Khan, former Chairman of the Association of Bankers, Bangladesh Limited including those who have retired invest in the Government, to acquire 10% additional capital along with it becomes a source of funds. I am privileged to ever-growing business of th
stock market, in derivative products and hedge
(ABB) and former Managing Director & CEO, Mutual Trust Bank Limited (MTB) talks funds. Secondly, the governments in those payment of a premium amount. MTB share capital went up be an independent director of a number of Bangladesh capital market
public limited companies. It is my responsibility
considerably because of this infusion of capital. Other banks

about the growth of the country’s banking sector, the potential of mergers and the countries have state pension funds and old age will also have to work on this issue to improve their balance to ask the companies relevant questions, ensure and align its business visi
promise of digital banking. Amongst other pursuits, he now teaches Banking and benefits for someone of my age. Here, in the sheet strength and their financial health and go to various they hold board meetings regularly and adhere with technological
advancement. The company
Finance at a leading private university and is the Senior Vice President of the private sector, there is no pension or any other investors and request them to put in money to increase to all laws and regulations. Therefore, people has now taken initiatives t
Metropolitan Chamber of Commerce & Industry, Dhaka (MCCI). retirement scheme. I get zero benefits, and capital. who have experience in government and public search for a new, robust, h
instead my taxation is still nearly 30%. After I administration, teaching, banking, etc., are able
retired, I put my benefit receipts in the bank for Against the backdrop of falling trend in to contribute to better corporate governance, frequency CCP System with
an interest of 9%-10%, which has now come down non-performing loans (NPLs) , what kind of challenges transparency and better scrutiny through multi asset-class and multi
to half, that is 4-5% in a country with no private do proper monitoring of regular loans along with performing these roles and responsibilities. exchange transaction Risk
What has been the most adverse effect of the airplanes, trains, buses, and even taxi services, micro-bus pension fund. While I support single digit interest rescheduled loans amid the Covid-19 pandemic pose Our stock market potential and capacity is Management, Clearing &
for the banking industry? Can you elaborate on the
pandemic on the country’s banking sector? services and CNG run auto-rickshaws. Rickshaws were rates, I also advocate for the introduction of kind of policy support the banking sector has extended greatly underutilized, so many more companies Settlement facilities along
I would like to say the most adverse effect of the affected a bit less. If we analyze all these, we can clearly see pension schemes for the private sector employees. to customers, lenders and business in this ongoing need to come forward and float their shares. with integration of differe
pandemic on the country’s banking sector is still to that the country’s overall business sector and industries have It is very good for the country’s industry to drop pandemic? Meanwhile, Central Depository Bangladesh entities like stock exchang
come. It’s not yet here. The banking sector for now been greatly affected. Retail clothing business has been interest rates from 15-16% on car loans to 9%, Non-performing loans have dropped in the banking sector. Limited (CDBL) was set up in August 2000 by depositories, clearing
has weathered the effects of the pandemic quite well. affected because people cannot go out to shop due to repeated home loans from 15-16% to 8-9%, industrial However, the drop is more so because of the restructuring and the country's Government Owned Banks, members and banks for
They have managed to stay afloat and serve the lock-downs and curbs on movements outside of their homes. commercial loans to 7-8% from 14%-15%. rescheduling of classified loans allowed under the Bangladesh Investment Corporation of Bangladesh (ICB), smooth handshaking with
people of the country, and, alongside, they have In the future, customers whose loans have been restructured Unfortunately, the private sector credit growth Bank circulars, issued to give relief to the business houses in Private Commercial Banks (PCBs), Foreign the third party application
enhanced their digital banking capabilities. The and rescheduled, will have to start realizing that they have to has dropped in this pandemic situation from the rise of losses suffered by them due to the effects of the Banks, Merchant Banks, Publicly listed through Industry Standard
pandemic came as a blessing in disguise for banks to pay back the banks their dues. At that time, some of them will 14.5%, to to 8.5%. The banks are sitting on piles raging pandemic. These measures allow customers to remain Companies, Insurance Companies and Dhaka & and customized API.
upgrade, upscale, reinforce, and rejuvenate their not be able to pay, and, as a sequel, the country’s Non of idle cash, that is excess liquidity. People are regular so they can continue to borrow to run their businesses Chittagong Stock Exchanges with the Our stock market is a hidden gem. It needs to have be
digital banking platforms. Banks have been Performing Loan ratio will go up triggered by the adverse not spending money, instead those who can are and pay salaries, utility bills and have some sort of production collaboration of the Asian Development Bank corporate governance standards, educated and trained
instrumental in dispersing the stimulus packages effects ultimately resulting from the pandemic. Secondly, the saving and putting it in the banks. Banks are of goods and services ongoing. At this moment, because of (ADB). CDBL's core services cover the efficient merchant bankers, traders, security brokers, and more
announced by the Honorable Prime Minister. They banks will have to make higher provisions, which will mean unable to disburse funds because there is no these foregoing measures, banks have stable balance-sheets delivery, settlement and transfer of securities experienced people in the Bangladesh Securities and E
have also restructured a lot of loans which were erosion of their profitability. Thirdly, they will face challenges substantial private sector investment. It is a and are thus able to support the businesses to meet their through computerized book entry system, i.e., Commission (BSEC). We are now fortunate in having a
going bad. to function effectively and carry out normal expansion and conundrum which will work itself out once the urgent and emerging needs. As the loans are mostly regular, recording and maintaining securities accounts visionary and outstanding BSEC Chairman who understan
Now we come to the future – customers have been diversification activities. This means that there will be less pandemic lifts, the investment activity increases banks are also deriving a good income and making a profit, and registering transfer of securities; changing the capital market very deeply, and he is guiding an
greatly affected. Hotels have closed, restaurants have employment opportunities for the country’s young population and the country’s economic activity increases, which means they are not eating into depositors’ money. They the ownership without any physical movement for better days with great dexterity. He is supportiv
incurred losses, many of the entertainment parks are graduating from the colleges and universities. All these effects and at that time, the deposit rate will have to protect the money deposited by their customers first. or endorsement of certificates and execution of private sector, so I am hopeful that if more structur
closed. The transportation sector was hit because of will likely come in the future and the sector has to prepare automatically come up through economic forces Banks are one of the largest taxpayers of the country, transfer instruments. The Central Depository are ushered in, they will have a positive impact on
the lockdown bringing a stop to the movement of accordingly. of demand and supply. contributing to a sizable portion of the nation's annual System (CDS) operated by CDBL has proved to bourses and country’s economy.
32