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‘State-owned banks have more money but cannot lend enough’

  • Published at 10:20 pm January 28th, 2019
Pubali Bank Managing Director Abdul Halim

In an exclusive interview with Dhaka Tribune's Mehedi Hasan, Pubali Bank Ltd’s Managing Director and CEO Md Abdul Halim Chowdhury, talks about the bank’s vision, financial inclusion, challenges and possibilities for the country’s banking sector, as well as other issues

Abdul Halim Chowdhury joined Pubali Bank Ltd as a principal officer in 1988. During his tenure there, he has served in several positions, such as head of different corporate branches, general manager of credit division, deputy managing director and more.

He has been serving the bank as managing director and CEO since December 2014.

How do you assess Pubali Bank?

Pubali Bank is the first bank of the Bengalis. It initially commenced operations as Eastern Mercantile Bank Ltd, helmed by Bengali entrepreneurs in 1959. We can proudly say that our bank had a role to play in the War of Liberation, as during that period, Bangabandhu Sheikh Mujibur Rahman had asked us to keep the tax money in our bank. We did the clearing work.

After Bangladesh’s independence, the bank was renamed Pubali Bank in 1972, according to the policy of the erstwhile government. Due to changes in the political scenario, it was denationalized in 1983 as a private bank and renamed once more as Pubali Bank Ltd.

The bank’s performance slumped since, incurring losses for a lengthy period of time. After 1994, the bank turned around financially and has not look back ever since. This year, our operating profit was more than Tk1,000 crore.

The quality of our manpower is the best in the banking sector, as the recruitment process is very transparent. 85% of our officers are less than 40 years of age.

Currently, we are the largest private commercial bank having 473 branches and also the largest real time centralized online banking network.

What challenges is the banking sector currently facing?

Non-performing loan management and compliance are the main challenges in our country’s banking sector. The board of directors of many banks should not interfere over their management to sanction loans. Fortunately for us, our board does not interfere in our decisions.

As more investment is needed in the industrial sector, banks will need more money to finance such projects. This is another big challenge. The emphasis will be on offshore banking to acquire foreign investment.

What do you want to achieve in 2019?

We want to focus on NPL management. Our classified loans are below 5%. This year, we will try to reduce it even further, complying with the rules and regulations set by Bangladesh Bank.

NPL has reached a peak of Tk1 lakh crore in 2018. How can we curb it and possibly recover them?

The amount will come down in the October-December quarter of 2018-19FY. Banks are now more aware about default loans.

Bankers must learn from the past. Many businessmen in Chittagong have been defaulting due to business losses. But there are some people who default on purpose. Bankers should be careful about them.

What are the challenges in finding quality borrowers?

There are adequate highly educated entrepreneurs coming into business. The challenge lies in identifying them from our end. We have to focus on small and medium entrepreneurs.

How can the sector’s cash flow increase, in wake of the recent liquidity crisis?

Some banks have opened aggressive LC’s (letter of credit), often beyond their capacities. As a result, banks have to buy dollars from external sources. Although the crisis is over, there is a slight mismatch between public and private banks. The state-owned banks have more money but they cannot lend enough. On the other hand, private banks have more opportunity to lend, but they do not have the money. Thankfully, Finance Minister AHM Mustafa Kamal is very keen about reforming the banking sector.

What are the challenges in bringing interest rates down to single digits?

Lending rates are coming down gradually, but some debt products are not being brought down to 9%. Bringing them to 9% is difficult, thanks to high deposit rates.

Unethical competition between banks also causes interest rates to spike. As a result, the new generation banks are in the centre of this problem.

Do you think Bangladesh needs more banks, keeping the size of our economy in mind?

Many people still cannot avail banking services. Here, instead of new banks, booth banking can play an important role. Additionally, if the mergers and acquisitions (M&A) regulation is amended, then weaker banks can merge with stronger banks as well.