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Research Workshop on performance of new comercial Banks held in BIBM

A day long research workshop was held at the Bangladesh Institute of Bank Management (BIBM) on August 10, 2017 in its auditorium. A paper titled was presented in the workshop by  Mohammed Sohail Musrafa associate Professor of BIBM. Other members of the research workhop team are Tanweer Mehedee,Assistant Professor,BIBM; Md. Masudul Haque, Assistant Professor,BIBM; Md. Abdul Halim, Lecturer,BIBM.

The objectives are to find out the similarities and dissimilarities of new comercial banks operations.To find out the strengths and weaknesses of new comercial banks operations and to identify the changes in recent times.The study also identifies the problem areas as well as success factors in trade services operations and suggests some possible measures for better functioning of new comercial banks operations. A good number of participant’s senior bank executives, academicians, media representatives, faculty members, officers of BIBM participated in the review workshop.  

The draft study report was released at a research workshop on 'An Evaluation of the Performance of New Comercial Banks' held at the BIBM auditorium in Dhaka, with BIBM director general Dr. Toufic Ahmed Chowdhury in the chair.

In 2012, the central bank had faced tremendous pressure from the government high-ups to quickly approve those banks even before it could properly scrutinise the applications, the study pointed out. The BB had noted that the ratio of opening rural and urban branch by the new banks will be 1:1, which would help increase the bank branches in the rural areas and improve financial inclusion. But the home truth is that no bank can expand in rural areas before concentrating and making business in urban areas, said the study report.

Taking part in the discussion, senior bankers and experts recommended introducing immediately the merger and acquisition law along with comprehensive exit policy for the banks to efficiently manage possible systemic risks.

They also suggested the new banks to stop aggressive banking for ensuing discipline in the country's banking sector, saying that the banks will have to follow the risk management guidelines for improving their performance.

The overall performance of 2-3 new banks out of nine is not up to the mark, BB deputy governor SK Sur Chowdhury told the workshop.  He said the central bank has already issued prudential guidelines for the banks to improve their overall financial health. The BB is very much aware of the vulnerabilities of the new entrants and constantly monitoring developments in these institutions, he said, adding that the central bank appointed observers to two of the new banks for ensuring close monitoring and supervisions.

The study also found that the new PCBs were not following the guidelines of Bangladesh Bank (BB) in borrower analysis, credit risk assessment, credit risk grading, credit approval and, credit sanctioning and disbursement while conducting a focus group discussion with the banks' officials. Besides, a good number of irregularities and malpractices related to credit were found, ultimately increasing the rate of non-performing loans (NPLs) of the new banks.

In hiring entry-level positions like probationary officers (POs) or management trainee officers (MTOs), some of the new PCBs put emphasis on reference or political affiliation rather than the academic and professional qualifications of the candidates, according to the study.

AK Gangopadhya Chair Professor of the BIBM Khondkar Ibrahim Khaled suggested the authorities concerned to give approval of the new banks on the basis of entrepreneurs' efficiencies, not on paid up capital. He also emphasised on introduction of the mergers and acquisitions act immediately. Supernumerary Professor of the BIBM Helal Ahmed Chowdhury suggested the new banks not to buy loans from other banks without due diligence.

Supernumerary Professor of the BIBM Muhammad Yasin Ali said the central bank should monitor the overall activities, including CSR (corporate social responsibility) of the new banks closely.

Nurul Amin, chief executive officer (CEO) and managing director (MD) of Meghna Bank Limited, said his bank was planning to go for IPO (initial public offering) next year. He said the share of loans and advances of the new banks will reach to 5.0 per cent, instead of the existing level of 4.2 per cent, of the overall industry's loans and advance by the end of 2017.

Loan defaulters should be politically boycotted, said the senior banker while explaining the changing mentality of the loan defeaters. CEO and MD of the NRB Bank Limited Mehmood Husain also spoke on the occasion.

Written by Manager

Tuesday 22nd August 2017