KAM Majedur Rahman, managing director and chief executive officer of Premier Bank, in a recent interview with New Age has talked about the current situation of the country’s bank sector. Interviewed by AKM Zamir Uddin

New Age: What is the present situation of the country’s bank sector?
KAM Majedur Rahman: The country’s bank sector is still going through a tough time as businesspeople are yet to change their approach to business expansion. They had adopted a wait-and-see policy to business expansion during the political unrest in the run up to the January 5 national polls and they still maintain the attitude. The advance-deposit ratio, which is one of the key indicators of profitability for banks, has been declining over the year. Loan disbursement by banks to the small and medium enterprises has recently decreased, creating an alarming situation. Against the backdrop, the private sector credit growth has failed to avoid a plunge after the general elections.
Moreover, private sector foreign loans approved by the government have also put an adverse impact on the bank sector as such type of loans pushed up surplus liquidity in banks.
The authorities concerned should seek alternative way to avoid foreign loans.
NA: What are the main reasons for the increase in financial scams in the bank sector in recent times?
Majedur: Financial scams in the bank sector have recently increased due to lack of good governance in the sector. The boards of directors of banks have recently increased their interference in the daily activities of their management committees. The practice is harmful to good governance. Under such practice, management will not be able to stay away from corruption. Corruption in the bank sector will decrease if banks’ boards do not make unwanted interference in the management’s decisions in sanctioning and disbursing loans. Besides, banks are still facing crisis of mutual understanding among them due to the Hallmark Group and Bismillah Group scams.
NA: What is the cause of the high rate of interest in the bank sector?
Majedur: Banks’ interest rate on lending has already dropped between one per cent and two per cent, but the deposit rate is yet to decrease due to the high rate of interest on the government’s savings certificates and bonds. Moreover, a high inflation pushed up the interest rate as banks have to give their depositors two per cent to three per cent interest more than the existing inflation rate. For this reason, the interest spread rate between lending and deposit has not decreased expectedly.
NA: Will BASEL III create any tough situation for banks in raising their capital basement?
Majedur: The majority of them will face pressure in raising their capital basement initially in accordance with the BASEL III recommendations as they will have to maintain 2 per cent buffer capital along with 10 per cent minimum capital against their risk-weighted assets. Besides, banks will have to maintain adequate capital to fulfil the pillar II in line with the BASEL compliances. Under the circumstances, banks should expedite their business in a bid to fulfil their new capital basement. The country’s banking sector will be able to keep the required capital if the ADR in banks increase in the coming days.
NA: What is your opinion about the recent trend in the country’s macro-economic situation?
Majedur: The country’s trade deficit narrowed in the last few months and it enjoyed a surplus current account balance in the period due to higher export earnings against lower import payment. The trade deficit declined in the last few months as the import of capital machinery and industrial raw materials dropped significantly due to the political unrest. For this reason, the country has failed to get anything to be complacent from the narrowed trade gap. More time will be needed for the country’s macro-economic situation to rebound as a huge number of foreign buyers have pulled out their business from the country. However, I hope that the country’s economy will start to get its pace at the beginning of the next fiscal year.
NA: What is the focus of Premier Bank in expanding its business operation?
Majedur: We are now trying to expand our lending programme in the small and medium entrepreneurs and the agriculture sector. We will give more importance to the export sector financing. We are going to introduce internet, SMS and mobile banking to attract more clients. Our bank will bring more products in card-based transaction services in the quickest possible time.