Getting new business has become the biggest challenge for banks now as companies have been suffering from aftershocks of the prolonged political turmoil in 2013 and the first quarter of this year.

This challenge is intensifying in the wake of low-cost foreign currency loans taken by local entrepreneurs, a rise in the cost of doing business for the apparel makers, higher lending rates and nonperforming loans (NPL). Provisioning rules have also put further pressures on the businesses.

These are the views of Ahmed Kamal Khan Chowdhury, managing director of Prime Bank.

“Some sectors, including garment, are not performing well. The NPL for small and medium enterprises has also increased because of their inability to cope with political turmoil,” said Chowdhury.

The apparel sector that accounts for 80 percent of the country's exports is going through an upheaval -- from compliance to competition and a rise in the cost of doing business, he said.

“We have become choosy in financing the garment sector. Companies that can sustain shocks will only be financed,” the banker said.

Prime Bank is the first bank in the country that has formed a garment monitoring unit involving a team of merchandisers who regularly visit the factories to see their business and compliance issues, he said.

On low-cost foreign currency loans taken by local businesses, Chowdhury said the trend has emerged as a big threat to them as borrowers have been paying off their loans with the local banks with foreign-sourced money at an interest rate of 4.5 percent.

“We are losing business as they could be our potential clients,” he said, adding that Prime Bank could give out foreign currency loans, but the spread is so low that it would not be viable.

Prime Bank was established in 1995 with an outlook to offer superior quality services that has paid dividends and made it one of the top private commercial banks in the country.

The bank's deposit stood at nearly Tk 20,500 crore at the end of 2014, reflecting people's growing trust on the bank.

The bank's NPL was 7.61 percent in 2014, well below the industry's average of 9.69 percent; its capital adequacy ratio is well ahead of the central bank set requirement as well.

However, the bank was running smoothly until it was hit by a loan scam in 2012.

According to the Anticorruption Commission, Bismillah Group, a terry towel exporter, siphoned off around Tk 1,255 crore from five commercial banks on false documents and inadequate collateral.

The group allegedly took over Tk 300 crore from Prime Bank on false documents. The scam hurt not only the bank's image, but also its profits.

“It was a bad experience for Prime Bank, but we learnt a lot from it,” said Chowdhury.

Bismillah Group took advantage of the bank's poor credit judgment and operational lapses -- a lesson that prompted the bank to strengthen the internal system.

“We have been introducing a centralised system to avert this kind of a loan scam; 60 percent of the work is already done.”

But the bank had to write off Tk 250 crore of the Bismillah loan after keeping the same amount as provisions, which affected profitability. Prime Bank is currently fighting the case in court.

Chowdhury also discussed the bank's business model, use of technology-driven products, lending rates, and corporate taxes.

The bank now focuses on the top 20 percent of the clients who generate 80 percent of revenue for the bank. “We have opened a dedicated desk to provide these clients with extra and superior services.”

Chowdhury said customers' choices in getting bank services have been shifting with changes in technology. Many customers now prefer alternative delivery channels, such as the internet and mobile phones, in taking bank services, he added.

On the lending rates, he said banks have been reducing the rates despite facing poor demand for credit; Prime Bank has been giving out corporate loans at 11 percent, which is up to 12 percent for term loans. The lending rate was 15 percent a year ago, he said.

“This has been possible because of a reduction in the cost of funds,” he said, deposits cost them just 6.36 percent now, down from around 8 percent a year ago.

He welcomed the government's move to cut bank's corporate tax by 2.5 percentage points to make it 40 percent, which would help many banks meet their capital adequacy requirements and reduce interest rates further.

Prime Bank also sets aside 4 percent of its net profit for corporate social responsibility activities that go to the sectors of education and health.