Sonali Bank, battered by the sensational Hallmark loan scam and crippled by a large amount of bad assets, is now under surgery to remove cancer and pimple from its health. But this state -owned bank still remains the largest player in the country's inclusive financial growth momentum.
The bank has been discharging its nation-building responsibilities supporting the government in implementing its various socio-economic schemes covering all spheres of the economy, Managing Director and CEO of Sonali Bank Limited Pradip Kumar Dutta, claimed this during his exclusive talks with The Daily Observer last week.
When the bank was overburdened with high classified loans in the 90s, one former central bank officer termed the situation the cancer and pimple.
"I am now under pressure and on the table of surgical operation to remove all bad assets of the bank", he said noting that the bank has already bounced back with impressive growth in its all strata of operations.
But the Hallmark has taught us many thing and cautious us to remain alert to face the banking upcoming challenges and riskss driven by globalization, he said.
Bangladesh are under a challenging situation. To appropriately address strategic and regulatory challenges, "impeccable execution is a must. Constantly improving operational efficiency has to be high on the agenda of bankers", he said.
With the slogan-Your trusted partner in innovating banking, the state owned Sonali Bank has been delivering a wide range of products to support divergent needs of people aiming at enriching their lives, creating value for the stakeholders and contributing towards socio-economic development of the country since its inception in 1972, immediately after the independence of Bangladesh.
Pradip Kumar Dutta has come at the highest position in the country's commercial banking industry through his long 34 years' of career service with diversified working experiences from probationary officer to managing director in different locations.
"My first step was rigorous surgery operation to reduce the cancer. I took the recovery as my first agenda. And this has an impressive result", Pradip Kumar Dutta said.
"Hallmark scandal is the outcome of negligence to the banking rules and regulations by a few people", said Pradip Kumar Dutta who has been grown up through a long 34 years' of banking career said.
During 1990 to 2000, along with other nationalized commercial banks, Sonali Bank came to the focal point of discussions in the banking industry as it was overburdened with huge amount of non-performing loans- nearly 50 per cent of its total loans and advances generated by dictated credit policies of 80's.
The central bank estimated that 166 billion taka of loans at the four big state-owned banks were in default-roughly 20 per cent of the total. The government injected 41 billion taka into them that month, 20 billion taka of which went to Sonali Bank.
After the scam, Sonali Bank faced severe liquidity crisis, when it could not maintain deposit of cash reserve ratio (CRR) with the Bangladesh Bank (BB) even after borrowing Tk 40-50 billion each day; due to the failure, it had to give penalty of about Tk 800 million to the BB.
The rot at the state-owned banks has not brought the economy to a halt. Lending continues to grow, albeit by less than the central bank's target of 16 per cent a year. Private banks, in turn, have helped boost garment-making, its main industry. Clients are lining up to secure loans for garment factories, power plants and steel mills, among other projects.
"But the situation has recently been improved. Sonali Bank is now in a good position in terms of all indicators except two ones-non-performing loan and capital, he said, adding that the bank is trying its best to recover the CL", Dutta told the daily. In 2013, Sonali Bank achieved a tremendous success in recover of non-performing loans especially from the big defaulters. We have already cut down the bad assets by 15.32 per cent, he said.
The recovery amount of Sonali bank from top 20 defaulters was Tk 227.16 crore as on June 30, 2013 and Tk 154.30 crore as on june 30, 2014 which eased pressure on its health.
Through some rigorous operations with the view to recover its health, Sonali Bank stood out from crowd and was moving on the right track since 2008. A World Bank mission found in 2009 that the then management team was successfully meeting most of the Key Performance Indicators (KPIs) agreed for the bank.
"The bank maintained an increasing trend in deposits, loans, income, operating profits and net worth. Remarkable achievements have been made in recovering bad and doubtful loans and reducing the ratio of non-performing loans to total loans', the WB report said.
"The Management Team have not only turned the bank into operationally profitable organization, but have also improved customer services; introduced new products; developed policies and manuals for effective and efficient operations of the bank", the report said.
In 2012, when it was found that a big chunk of suspicious loan was pending with a single client, then the management could save the money. But they over looked this", Dutta said noting that the posting of the responsible manager was pending as high ups remained blind to him.
In this connection, he said to survive in the highly competitive and risky banking environment, banks must adjust to ever-changing regulations and the downturn's effects on profitability and performance. "The successful institutions will need to reassess their operating models and address the effects of regulatory reform, competitive dynamics, evolving markets", he said.
The likely introduction of Basel III standards, as an example, will have a major impact on the way institutions run their business, he said replying to a question regarding the upcoming challenges in the banking industry.
The constant evolution of local and international regulations is a major driving force in the banking and securities industry. To appropriately address strategic and regulatory challenges, banks have to optimise their processes, control their cost structure, and explore new operating models using all the tools now at their disposal", Dutta said.
"There is likely to be an increased focus on capital efficiency. The introduction of new oversight rules and bodies may also have far reaching implications for the industry", Dutta said adding that the Hall Mark Scam is the bright example.
Replying to another question, Sonali Bank said state banks are now facing a new crisis with increasing mismatch between their credit and deposit growth as potential entrepreneurs are shy to take any new project.
"We are facing tough time with a huge amount of surplus liquidity as good and real entrepreneurs are not responding our proposal", Sonali bank chief said.