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Thursday, August 28, 2014, Bhadra 13, 1421, Zilqad 1, 1435 Hijr

Top Bankers Talk To The Daily Observer-9
Foreign borrowing soars balance sheet, hurts bank's health, says NCCB chief
Faruk Ahmed
Publish Date : 2014-08-28,  Publish Time : 00:00,  View Count : 92
Golam Hafiz Ahmed, Managing Director of National Credit and Commerce Bank Limited (NCCB) has hit the nail on the head when he said delinquency, diligence and disciplines have come under the scrutiny of banking pitch where domestic banks are now passing very tough time sitting idle on huge amount of idle funds.
"We are now sitting on the idle funds as quality customers are not coming to enjoy our loans. This has become a serious concern for the domestic banks as it is dragging down their profitability. So banks alone cannot be blamed for lower than expected credit flow driven by high interest rate", Hafiz Ahmed said during his exclusive talk with the Daily observer on Monday.
The situation has been aggravated due to higher amount of foreign currency borrowing by corporate bodies at lower rates and sparking gloomy signal to the newly born private banks that are under pressure to find a mashie market place in the highly competitive market, he added.
If some banks face merger or equisition  it will hit the economy, as banks are the major tax payers to the government, he said.
"Foreign borrowing by corporate bodies are inflating FDI balance sheet, but injuring banks' heath", Hafiz Ahmed told the daily.
The central bank recently allowed corporate bodies particularly in garment sector to take loans from overseas banks and financial institutions in the form of foreign currency due mainly to increase FDI flow and partly to force the banks to reduce their lending rates.
National Credit and Commerce Bank Ltd is private bank with its commendable roles in personalized services and technology based environment since its inception in as bank in 1992 with its previous experience as as an investment company since in 1985.
NCC Bank as rated as 'AA' in the Long Term and 'AR-2a' in the Short Term with stable outlook by a local credit rating agency based on the performance indicators in 2013. An institution rated 'AA' in the long term must have strong capacity to meet its financial commitments and 'AR-2' in the short term should have the capacity to meet the commitments in a timely manner.
Golam Hafiz Ahmed, an eminent banker with 32 year's long experience was  expressing his opinion on the state of the country's banking industry in Bangladesh pointing finger at the recent central bank's decision allowing corporate bodies to borrow foreign currency loans from abroad at a very low rate.
"We are facing tremendous pressure to manage the risks, balancing the funds rightly and maximize the profits hit by delinquency and the mounting default culture which restrict the banks to cut lending rates to attract potential investors", he said.
"If this situation continues, some banks will face merger or acquisition what has already happed in the global banking industry and in our neighbouring states also", Hafiz Ahmed said seeking the immediate measures of the authority concerned to address the problems.
in this regard, he pointed out some long pending issues that remain as the main obstacles to the recovery of non-performing loans. This includes huge number of pending money suits with the courts driven by  
More than nine lakhs cases are now pending with the courts to recover nearly Tk 42,500.00 crore due to legal complications which dragged down the profitability of concern banks. High interest rates remain a major cause for making the loans bad.
NCCB Managing Director, however, admitted that the interest rate should come down further. " But the cost of funds of banks is high as a large portion of their assets are classified with a few businessmen who are not paying back to the banks", he said.
In this regard, NCCB chief said the banks in recent days have already cut their interest rate particularly due to sudden slash in credit demand driven by high amount of foreign currency borrowing at comparatively very low rates.
"Banks are considered to be stable, reliant and dull by the world, or that's what we would like them to be. Instead banks are inherently risk managers, as we have now specifically realised in the past five years", Hafiz Ahmed said.
NCCB chief said the banking sector of Bangladesh is now at cross roads when globally the industry is changing its face with new outlook and under low capital based banks have come under scrutiny. In Bangladesh, banks are limping with huge excess liquidity as more than 10 per cent of their assets are now sleeping with a few top line customers.
"Regardless of location or position, it's a critical time for the banks. Decisions taken now will determine how well they are positioned to benefit from the recovery in developed markets, the new regulatory landscape and the next wave of expansion in the RGMs", Hafiz Ahmed said.
For banks, he said now top priorities for the banks are regulatory compliance, improving asset quality, enhancing customer centricity, focusing on digital convergence, and tackling competition from non-banks.
"Banks are therefore making business and technology investments to change their business models to comply with new regulatory requirements, enhancing capital adequacy, rolling out new channels, and leveraging customer data analytics and predictive analytics to enhance customer understanding and prevent fraud", he said.
Businessmen have become worried with the increase of the interest rate. They are saying that their cost of doing business is going up with the increment of the borrowing rate of bank financing. As a result the production cost is getting increased and the they become unable to pay back the loan.
And this has reduced the flow of credit to the private sector, the main driver of the economy.
But NCCB Managing Director Mr. Hafiz Ahmed denied the allegation. Banks along cannot be blamed for this situation. Entrepreneurs and businessmen who have held a large amount of loans in their hands should not be spared, he said.
"Banking is a business of risks and conservativeness. We the bankers are committed to pay good dividend to our stake holders as well as our customers. But if some customers do not pay back our money, then how can we serve our stake holders and other customers", Hafiz Ahmed said.
He said banks can be basket cases if they manage risk badly or high return investment vehicles if they manage risk well, but it's all about risk management. This is because banks make money out of lending and the art of lending is to ensure the customer will pay back and pay back at a profit with interest.
Golam Hafiz Ahmed took the responsibility of the Managing Director and CEO of NCC Bank in 2014. Prior to this appointment, he was the Additional Managing Director and Acting Managing Director and CEO of the bank.
Apart from client relationship management and business line responsibilities in his long banking service, Mr. Hafiz Ahmed had also excelled in international and branch banking during his early and mid career.

Editor : Iqbal Sobhan Chowdhury
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