At a time when much of Bangladesh’s banking industry is reeling under toxic loans, shaken depositor confidence and relentless liquidity pressure, Modhumoti Bank, PLC is attempting a markedly different script - cautious expansion, collateral-backed lending and an aggressive pivot towards the small and medium enterprise segment.
Riding on what its management describes as a strong deposit base, disciplined asset quality and governance-led operations, the fourth-generation private commercial bank has now reset its business strategy to place funds where risks are lower, recoveries are stronger and long-term sustainability appears safer.
In an exclusive interview with The Daily Observer, Managing Director and Chief Executive Officer Md Shafiul Azam said the bank is deliberately moving away from reckless volume chasing at a time when many lenders are paying the price for aggressive and often imprudent credit expansion.
“Deposit is the lifeblood of any bank. We did not chase deposits blindly; customers came to us because they trust us,” he said.
That confidence has translated into a significant liability build-up. Modhumoti Bank crossed the Tk 10,000 crore deposit milestone this year, a growth that the bank attributes to consistent depositor faith in its governance-based operations and payment discipline.
“Our deposit growth is not artificial, not incentive-driven - it is market-driven. In today’s banking environment, trust itself has become a financial asset,” Azam observed.
His remarks come at a time when Bangladesh’s banking sector remains trapped in a prolonged confidence crisis, with bad loans swelling, several weak institutions under regulatory stress and depositors increasingly wary about where to park their savings.
Against that backdrop, Azam described Modhumoti Bank as a “stability-focused institution” trying to preserve depositor safety rather than chasing headline loan growth.
He said the bank has consciously embraced a conservative lending posture in line with Bangladesh Bank’s Advance Deposit Ratio discipline, maintaining an ADR of around 72 per cent.
“Some banks became desperate in lending, breached prudent limits and are now sitting on mountains of bad assets. We do not believe in that model,” he said.
Instead, Modhumoti is tightening its concentration on SME and medium-ticket collateral-backed lending, an area the CEO repeatedly described as the bank’s “sweet spot”.
“No red lines on oversized exposures - that is our board’s policy. We prefer medium-sized, fully secured loans. SME gives wider distribution, lower volatility and better portfolio resilience,” he noted.
Latest strategic disclosures also show the bank strengthening business diversification towards the cottage, micro, small and medium enterprise (CMSME) segment, making it one of the core engines of future credit growth.
Within that broader SME push, agriculture and agro-based lending have also emerged as an important pillar under the bank’s sustainable and rural finance programme, helping the lender widen its reach beyond urban concentration.
Azam said the board remains firmly opposed to unchecked large corporate exposures that have historically destabilised many banks in the country.
“We are fortunate to have a highly professional board that always insists the bank must run professionally - not emotionally, not politically,” he said.
That governance emphasis, he argued, is now showing up clearly in the numbers.
While a large part of the industry continues to battle alarming non-performing loan stress, Modhumoti Bank’s classified loan ratio remains below 3 per cent, significantly lower than the sector’s deeply distressed average, according to the CEO.
“We have no appetite for willful defaulters. In such cases we pursue legal recovery without compromise. But genuine borrowers hit by flood, pandemic or temporary shocks are treated through restructuring support. That is not leniency - that is practical banking,” he said.
The bank’s capital base, too, has expanded steadily over the years, rising to around Tk 500 crore from an initial paid-up capital of Tk 20 crore, reflecting what the management claims is a gradual but stable institutional strengthening.
Md Shafiul Azam, who has more than 34 years of banking experience and was reappointed Managing Director and CEO for another three-year term after leading the bank since 2016, said surviving the current banking climate requires not speed, but discipline.
He began his banking career with AB Bank in 1991 and later served in senior leadership roles at Shahjalal Islami Bank before joining Modhumoti Bank in 2014 as Additional Managing Director.
Turning to the broader economy, Azam said the country’s financial system is still absorbing the aftershocks of multiple external and domestic shocks - from the Covid-era supply chain disruption and Russia-Ukraine energy inflation to foreign exchange volatility and prolonged investment hesitation triggered by political uncertainty.
“Growth momentum has undoubtedly been squeezed. Cost of funds has risen, imports became volatile, businesses are cautious. This is not a normal credit cycle,” he said.
He strongly backed Bangladesh Bank’s contractionary monetary stance, arguing that inflation control must remain the first national priority before any meaningful interest rate easing can stimulate business expansion again.
“Inflation has to be brought down first - firmly. Without restoring purchasing power and price stability, cheap credit alone cannot revive confidence,” he said.
In a banking landscape crowded with scandal, weak governance and stressed balance sheets, Modhumoti Bank is trying to build a quieter proposition: protect depositors, lend selectively, keep defaults low and grow where recoveries are defensible.
Whether that strategy delivers breakout growth remains to be seen.
But amid an industry where many lenders are struggling merely to stay afloat, Modhumoti appears determined to prove that in Bangladesh’s troubled banking era, survival itself can be turned into a competitive advantage.
