Page 35 - IBT Sept 2021 (1)

ANIS A. KHAN
- Former Chairman,
Association of Bankers, Bangladesh Limited (ABB)
- Former Managing Director & CEO,
Mutual Trust Bank Limited (MTB)
- Senior Vice President
Metropolitan Chamber of Commerce & Industry,
Dhaka (MCCI).
What has been the most adverse effect of the airplanes, trains, buses, and even taxi services, micro-bus
pandemic on the country’s banking sector? services and CNG run auto-rickshaws. Rickshaws were
I would like to say the most adverse effect of the affected a bit less. If we analyze all these, we can clearly see
pandemic on the country’s banking sector is still to that the country’s overall business sector and industries have
come. It’s not yet here. The banking sector for now been greatly affected. Retail clothing business has been
has weathered the effects of the pandemic quite well. affected because people cannot go out to shop due to repeated
They have managed to stay afloat and serve the lock-downs and curbs on movements outside of their homes.
people of the country, and, alongside, they have In the future, customers whose loans have been restructured
enhanced their digital banking capabilities. The and rescheduled, will have to start realizing that they have to
pandemic came as a blessing in disguise for banks to pay back the banks their dues. At that time, some of them will
upgrade, upscale, reinforce, and rejuvenate their not be able to pay, and, as a sequel, the country’s Non
digital banking platforms. Banks have been Performing Loan ratio will go up triggered by the adverse
instrumental in dispersing the stimulus packages effects ultimately resulting from the pandemic. Secondly, the
announced by the Honorable Prime Minister. They banks will have to make higher provisions, which will mean
have also restructured a lot of loans which were erosion of their profitability. Thirdly, they will face challenges
going bad. to function effectively and carry out normal expansion and
Now we come to the future – customers have been diversification activities. This means that there will be less
greatly affected. Hotels have closed, restaurants have employment opportunities for the country’s young population
incurred losses, many of the entertainment parks are graduating from the colleges and universities. All these effects
closed. The transportation sector was hit because of will likely come in the future and the sector has to prepare
the lockdown bringing a stop to the movement of accordingly.
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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 securities How can Islamic banking improve the Another bank I want to give as an example is that
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 hassles of overall financial health of the banking Asia. Born in 1999, the same year as Mutual Trust
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 paperwork and the sector, and what kind of policy support are nearly double the size of MTB due to acquirin
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 certificates. can the government extend in regards to of Nova Scotia, Societe General – a French bank,
inflation rate of 5.64 percent affect be improved? this?
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 of the Islamic Banking started in a small way in Egypt lastly, Muslim Commercial Bank when these banks l
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 the in 1963. Later on, the Islamic Development Bangladesh. Bank Asia’s capital base and deposit-
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 and Bank formalized the definition. In March 1983, has now become stronger and it is doing great. I
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 as Islamic Banking started its journey in ardent supporter of mergers and acquisitions. Mer
Abdul Muhit, followed by his successor Mr. the banks can increase their capital base by giving stock Our stock market has always been very shallow. modernization and demutualisation of stock exchanges and a Bangladesh with the setting up of Islami Bank acquisitions improve a bank’s health by making i
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 raft of other such measures. The Bangladesh Securities and Bangladesh Limited (IBBL), and, today, it is a and stable and brings in economies of scale.
see single digit interest figures in the country’s add fresh capital and/or opt for rights share issues where are listed on the stock exchanges. There are Exchange Commission has promulgated the Clearing & great success story. Bangladesh's population is 50 years on, besides agent banking what else can
banking sector, which I have wholeheartedly possible. Shareholders are now unable to put in additional many enterprises in Bangladesh which can float Settlement Rules, 2017 to form a Central Counterparty (CCP) predominantly Muslim. Secondly, people are expect from this sector? How about the rise of di
supported over the years. In Scandinavian capital required, as the base has progressively gone up over their shares on the stock market and share the in Bangladesh. Under the said rules, a company has already generally religious and thirdly, people are banks?
countries, banks deduct money from customer the years. It is difficult for the original shareholders to fruits of their hard work with the general been incorporated in the name and style of Central becoming more religiously inclined. It is the This is one of my favorite subjects. MTB introduc
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 2019. The shift in the mentality of the general population banking when I was its CEO and by now the bank h
interest paid. In The Netherlands, if you put your paid-up capital through rights share issues. Therefore, development of the people and the country. shareholding of the company is held by Dhaka Stock which is making Islamic Banking flourish. And, agent banking centers. 50% of Bangladesh is unban
money in the bank, the bank will give you only companies need infusion of capital from external sources and When you float your company, investment Exchange Limited (DSE), Chittagong Stock Exchange Limited basically, Islamic Banking as it is being agent banking centers can help reduce this gap to
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 (CSE), Central Depository Bangladesh Limited (CDBL), local practised in Bangladesh today offers its a young lady in Savar with a Masters degree in Ec
can also take home loans for an interest of 6-7%. number of sources for injecting fresh capital into Mutual Trust from the stock market, and an investor can then banks and a strategic products and services akin to the conventional who taught at a school and ran an agent banking c
Large companies depending on their commercial Bank Limited (MTB) over a period of many years, and finally, expand into a new enterprise. This is how the investor (to be introduced). banks with similar looking branches and giving her autonomy and
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 offices. However, the accounting treatment is independence. Seeing he
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-art different and they need to be as much Shariah mother-in-law supportin
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 CCP System to manage the compliant as possible. In December 2020, the made me feel so proud a
stock market, in derivative products and hedge payment of a premium amount. MTB share capital went up be an independent director of a number of ever-growing business of the first Islamic bond came out, and we need more happy, when I went to t
funds. Secondly, the governments in those considerably because of this infusion of capital. Other banks public limited companies. It is my responsibility Bangladesh capital market of these products to tap into the surplus funds home for a humble lunch
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 vision held by the Islami banking system in the after the inauguration
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 country. agent banking centre in
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 advancement. The company For conventional banks, the Statutory Liquidity village. Agent banking
retirement scheme. I get zero benefits, and capital. who have experience in government and public has now taken initiatives to (SLR) ratio is set at 13.0%, which is much centers empower people
instead my taxation is still nearly 30%. After I administration, teaching, banking, etc., are able search for a new, robust, high higher than the Islami banks who have to keep villages and help make
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 only 5.5% of their deposits as SLR. I think aware of banking servic
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 Islamic Treasury products need to be launched and products. In the fu
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 in a much bigger way so that the SLR ratio can these agent banking cen
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 & be brought to par for all banks and a stronger have the potential of
for the banking industry? Can you elaborate on the
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 reserve situation emerges in our banking becoming a small
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 different system making it increasingly stable. sub-branch.
It is very good for the country’s industry to drop pandemic? Meanwhile, Central Depository Bangladesh entities like stock exchanges, COVID-19 has bolstered
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 Is the banking sector an overheated proliferation of digita
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 market? Do we actually need this many banking across the worl
commercial loans to 7-8% from 14%-15%. rescheduling of classified loans allowed under the Bangladesh Investment Corporation of Bangladesh (ICB), smooth handshaking with banks? The future will see a r
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 applications In 2000, Standard Chartered Bank (SCB) digital banks as future generations get more educ
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 acquired ANZ Grindlays Bank branches right become digitally literate, the internet becomes a
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. from the Middle East and up to Bangladesh. more smart devices become available. By 2030, I e
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 better Coincidentally, under the leadership of Mr. digital banking to have substantially taken the p
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 Muhammad A. (Rumee) Ali, the joint CEO of the traditional brick and mortar banks.
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 two banks Standard Chartered and Grindlays, I The banking sector in Bangladesh is well develope
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 Exchange was appointed as the Country Integration are getting increasingly sophisticated with the p
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 Manager, along with consultants from abroad services and branches striving to be at par with
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 understands and SCB senior resources. It was an exciting world. Plus, they have been able to employ so man
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 and shaping experience for me to undertake this challenging graduates, who eventually provide for their famil
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 supportive of the role and learn new things. To cut the long story as an economic multiplier for our fast developin
Photograph: Courtesy 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 structural reforms short, look at Standard Chartered Bank now - it banking sector’s development has been a boon to t
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 our is now one of the most powerful banks in the country’s economy, and helped the growth of the c
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. country, generating one of the best profits. bringing in sustainable development and financial