New banks are necessary to curb monopoly in the sector. Such banks offer financial services at a low cost for the unbanked population and stimulate healthy competition throughout the region. Ekramul Haque, managing director (MD) of Al Arafah Islami Bank Ltd (AAIBL), said this in an exclusive interview to The Independent on Monday.

The central bank should play an effective role in checking unethical techniques practised by banks, as new banks would provide cutting-edge competition. Under the government’s directives, the Bangladesh Bank (BB) decided to issue licences to several new banks in October last year. This evoked heated debate among economists, banking personnel and civil society members.

So far, the central bank has received about 37 applications in this regard. The applications would soon be scrutinised by a technical committee. Commenting on the issue, Haque said new players in the banking sector will benefit depositors, as the rate of interest offered by banks for deposit mobilisation would increase. On the other hand, the lending rate will be competitive as banks must sale its money that was bought from depositors, he added.

New banks would also address the unemployment problem by creating jobs  for hundreds of educated young people. “Currently, some banks are enjoying monopoly in making profit. As a single company, a bank cannot earn enormous profit,” he pointed out. “Records show that many banks have earned profit over Tk. 500 crore in a single year, as in 2011. At the year-end, banks disburse high dividend to share holders. Such profits result from absolute monopoly in the banking sector.

This ought to stop,” he observed. The high rate of interest is not congenial to the growth of industry, trade and commerce. Aggressive profit making tendency should end for a steady growth of the banking sector. At present, a bank’s management is under tremendous pressure to fulfil the annual profitability target, he added. A healthy competition in the banking sector is indispensable to curtail such unhealthy pressure and lower the cost of financial services. This would bring more unbanked people under the sector’s coverage, he added.

“The regulator should remain alert to check unethical practices adopted by banks after new players start their operation,” Haque cautioned. Since he took over charge of the AAIBL 17 months ago, Haque has turned the problem-gripped Bank into a profitable one. In 2011, the Bank’s profit increased to Tk. 450 crore from Tk. 290 crore in the previous year. Of this, the proportion of pure Bank business has been doubled to Tk. 411 crore, compared to Tk. 198 crore in 2010.

In 2012, the Bank has set its profit target at Tk. 400 crore. “All financial indicators of this Bank were showing downward trends. I’ve brought dynamism and generosity among Bank employees and revised some policies that brought significant results and made the Bank profitable,” said Haque. After making profit, the board of directors of the Bank awarded its employees a pay-scale, raising their salaries to present market standards. 

He said the Bank’s classified investment is the lowest among all banks in Bangladesh. Classified investment declined to 1.08 per cent by the end of December 2011, which was 1.14 per cent at the end of 2010 and 1.68 per cent at the end of 2009.“To bring success in the banking business, one should maximise profit, keeping in mind the regulatory aspects,” he remarked.

The AAIBL and its employees no longer take part in share trading. Instead, they concentrate on pure banking business. He said the Bank, at its 88 branches, has introduced complete online services for clients to deliver servives as quickly as possible. He described the AAIBL as a second generation Bank. The Bank started its operations in 1995, and has been ranked 8th among 10 Banks, according to CAMEL rating in 2011.

Haque said the Bank has spent Tk. 14.5 crore on Corporate Social Responsibility (CSR) activities. It has established a kidney dialysis centre at the city’s Topkhana Road and plans to set up another unit in Chittagong soon. Besides, each new branch of the Bank will distribute 15 solar panels free of cost in rural areas, in order to help poor households outside the electricity-covered area.

The Daily Independent/Bangladesh/ 11th Jan 2012