Kazi Zahidul Hasan :
The newly established nine banks are facing hard times to expand business amid sluggish business climate prevailing in the country, insiders said.
At the same time, they are also facing challenges of rising costs, intensifying competition and tougher regulatory burdens while developing their business and lending activities.
These banks are: NRB Commercial Bank, South Bangla Agriculture Bank, Meghna Bank, Midland Bank, Farmers Bank, UNBL, NRB Bank, NRB Global Bank and Madhumati Bank.
These banks have started journey from the middle of the year 2013.
“The newly established banks have failed to expand their business in line with their expectations as the overall business climate was not favourable for them,” Nurul Amin, Managing Director of Meghna Bank told The New Nation on Saturday.
He said, they are struggling to boost their lending business for lack of investment opportunities created by the political crisis. Such an adverse situation has diminished the banks’ ability to invest and it is negatively affecting their future plans for expansion.
“Our position continues to be eroded as most wealthy customers and big business groups have several financial relationships with the traditional banks and non-bank financial institutions. They have already established good relations with them. So, traditional banks continue to be the main choice for them,” he noted.
He further added that as we are not getting much response from big clients, we are now concentrating on lower value customers to enlarge our business.
Nurul Amin also mentioned that the newly established banks are also facing tough competition to expand their lending activities as older banks are competing with the same segment of products with a large number of clientele with offering lower interest.
“Persistent slowdown in economic activities from an uneasy business climate forced the banks to tighten their lending activities leading to a sluggish business for the new banks,” a senior official of South Bangla Agriculture and Commerce Bank (SBACB) Limited told The New Nation on condition of anonymity.
He said, banks continue to face the risk of rising non-performing loans and credit losses due to the political uncertainty and so that they are marinating a cautious stance in disbursing loans.
“At the same time, we are facing intense pressure from our competitors for business lending as they are providing a lower interest than that of us. We are mobilizing deposits at higher interest than the traditional banks and so how can we offer lower interest to the customers,” he added.
“The banking sector as a whole is now at cross roads. And it is difficult for them to respond to the current challenges,” said Dr Salehuddin Ahmed, former governor of Bangladesh Bank (BB).
He said, the prevailing business climate is taking toll on all the economic activities across the country leading to a fall for bank credit. “The investors have adopted a ‘wait and see’ policy in the wake of political unrest harming the business prospect for all banks.
Commenting on new commercial banks, Dr Salehuddin Ahmed said, they may not be able to expand business with a shortest possible time as there are 47 old banks in the field. “It will take at least five years to establish their business and generate sustainable profits,” he noted.
Insiders in the newly established banks said, the cost of their funds is between 11 per cent and 12 per cent. But it is within single digit for many old banks. In terms of lending, if a new bank offers a customer at 11 per cent interest, an old bank offers at 10.5 per cent.
The newly established nine banks are facing hard times to expand business amid sluggish business climate prevailing in the country, insiders said.
At the same time, they are also facing challenges of rising costs, intensifying competition and tougher regulatory burdens while developing their business and lending activities.
These banks are: NRB Commercial Bank, South Bangla Agriculture Bank, Meghna Bank, Midland Bank, Farmers Bank, UNBL, NRB Bank, NRB Global Bank and Madhumati Bank.
These banks have started journey from the middle of the year 2013.
“The newly established banks have failed to expand their business in line with their expectations as the overall business climate was not favourable for them,” Nurul Amin, Managing Director of Meghna Bank told The New Nation on Saturday.
He said, they are struggling to boost their lending business for lack of investment opportunities created by the political crisis. Such an adverse situation has diminished the banks’ ability to invest and it is negatively affecting their future plans for expansion.
“Our position continues to be eroded as most wealthy customers and big business groups have several financial relationships with the traditional banks and non-bank financial institutions. They have already established good relations with them. So, traditional banks continue to be the main choice for them,” he noted.
He further added that as we are not getting much response from big clients, we are now concentrating on lower value customers to enlarge our business.
Nurul Amin also mentioned that the newly established banks are also facing tough competition to expand their lending activities as older banks are competing with the same segment of products with a large number of clientele with offering lower interest.
“Persistent slowdown in economic activities from an uneasy business climate forced the banks to tighten their lending activities leading to a sluggish business for the new banks,” a senior official of South Bangla Agriculture and Commerce Bank (SBACB) Limited told The New Nation on condition of anonymity.
He said, banks continue to face the risk of rising non-performing loans and credit losses due to the political uncertainty and so that they are marinating a cautious stance in disbursing loans.
“At the same time, we are facing intense pressure from our competitors for business lending as they are providing a lower interest than that of us. We are mobilizing deposits at higher interest than the traditional banks and so how can we offer lower interest to the customers,” he added.
“The banking sector as a whole is now at cross roads. And it is difficult for them to respond to the current challenges,” said Dr Salehuddin Ahmed, former governor of Bangladesh Bank (BB).
He said, the prevailing business climate is taking toll on all the economic activities across the country leading to a fall for bank credit. “The investors have adopted a ‘wait and see’ policy in the wake of political unrest harming the business prospect for all banks.
Commenting on new commercial banks, Dr Salehuddin Ahmed said, they may not be able to expand business with a shortest possible time as there are 47 old banks in the field. “It will take at least five years to establish their business and generate sustainable profits,” he noted.
Insiders in the newly established banks said, the cost of their funds is between 11 per cent and 12 per cent. But it is within single digit for many old banks. In terms of lending, if a new bank offers a customer at 11 per cent interest, an old bank offers at 10.5 per cent.
