The country's leading economists and bankers have suggested strengthening of supervisory and monitoring capacity of the Bangladesh Bank (BB) to run the banking sector smoothly.

The suggestion came at a Bankers Summit-2012 organised by the Financial Excellence Limited (FinExcel), a private advocacy organization, held at BRAC CDM Saver in Dhaka Friday.

They also said the BB has the responsibility to ensure integrity of the bankers.

"Banks will need to carry out stress testing exercises regularly to identify and address emerging institutional vulnerabilities against shocks of both internal and external origin," BB Governor Atiur Rahman said while speaking as chief guest at opening session of two-day summit with the theme '50 Year of Banking in Bangladesh -Vision 2021.'

The central bank chief also said the banking sector in Bangladesh has grown several-fold since independence in 1971, in tandem with the uninterrupted spell of steady, stable growth of the country's economy.

Just one indicator may be sufficient to demonstrate the spectacular magnitude of banking business growth, he said, adding that credit and investment assets of scheduled banks amounted in December 1972 to a minuscule Tk 7.07 billion. The figure rose 654-fold higher at Tk 4625.85 billion as of December 2011.

Amid growing unauthorised financial institutions, the central bank governor urged people to remain alert against illegal banking.

"The institutions that are doing business without approvals aren't banks…their transactions are illegal. People need to understand which institutions are banks and which aren't," he said in reply to a query from reporters.

"The central bank has to increase its efficiency," Former BB governor Salehuddin said, adding that the efficiency along with integrity are essential for the bankers.

He also said the commercial banks will have to improve their fund management for minimising assets-liabilities mismatch, which is still a challenge in the banking system.

The former central bank chief also sees that the newly approved six commercial banks might face problem to hire sill manpower particularly to manage their foreign exchange operations.

"The introduction of non-conventional pro-poor monetary policy in a country like Bangladesh will be a challenging task, not purely for scarcity of resources or lack of institutional capacity but most importantly for the lack of political will," he said while describing formulation of monetary policy.

He also said Bangladesh should go beyond the conventional nation and approach to monetary policy and adopt heterodox policy. It should be a country not a homogeneous one.

Former adviser of the caretaker government Akbar Ali Khan said the interest rate spread is still higher in Bangladesh compared to other South Asia and East Asian countries due mainly to the lack of perfect competition.

He suggested the authorities concerned to tag the interest rate spread of the banks with income tax measures.

Regarding new commercial banks, former BB governor Mohammad Farashuddin said they will mop up fresh liquidity from rural areas across the country. "NRB banks will help boost flow of inward remittances."

Former adviser to the caretaker government Mirza Azizul Islam does not think the banking system will collapse after coming more commercial banks. But it was unnecessary to give the new banks."

He viewed the size of financial market is not large enough.

"Time is changing very fast and as we believe the world is becoming more competitive everyday if not every hour. To survive this fierce competition we must update our knowledge and energies our skill to face the challenges of the days ahead. If we fail to comply with the need of the hour we are only losing the opportunities for our sustenance," said chairman of FinExcel Limited Syed Abu Naser Bukhtear Ahmed.

He also said FinExcel has already launched its website (www.finexcelbd.org) where one can find information about FinExcel, its services as well as other relevant information.

Director Data Edge Limited Noor-A-Alam Chowdhury and former Managing Director of the Prime Bank Limited M Ehsanul Haque also spoke at the function.

Financial Express/Bangladesh/ 15th April 2012