Overall NPL declines but big defaults still very high
The non-performing loan in the banking sector has declined as per first quarter reports although the volume is still high, said Anis A Khan, Managing Director of Mutual Trust Bank Ltd (MTB) talking about the latest situation in the banking sector.
He said increasing and decreasing a bank's advance deposit ratio, deposit collection and rise and fall of liquidity position is a regular phenomenon in the banking system. But for long time stability, banks must maintain few indicators to be stable set by the regulating authority as well as defined under Basel-III standards.
He said it is necessary to change mindset in borrowing and paying back banks' loans and unless it happens, it is unlikely that reducing default loans will happen.
Mr Khan said under the existing rules it is quite possible to curb non performing loans. The government has already declared war against loan defaulters. "We have declared war against default loans. But what can we do if businesses do not pay back the debt? We cannot arrest them. Many of the businesses fled the country after taking big amount of credit from banks," he said.
Anis Khan, also a former chairman of the Association of Bankers Bangladesh (ABB) said the government recently made available a good numbers of facilities to defaulters. Using such facilities like extension of time for loan rescheduling at a down payment of 2 per cent loan defaulters should take the opportunities to payback their over dues to the banks.
He said except high default loans currently the overall banking sector is stable.
He said banks are playing pivotal role in the country's economic growth facilitating imports and exports. To continue this growth and keep it stable banks need to enhance their capacity to finance more business and investment in a competitive market. Our banks must achieve performance as per world standards.
Like other countries Bangladesh also needs to maintain BASEL-III standard rules of keeping adequate capital and maintaining few indicators like Net Stable Funding Ratio (NSFR)-a long term liquidity coverage issue for the banks, Liquidity Coverage Ratio (LCR) and Leverage Ratio (LR).
The MTB chief said, his bank has already achieved such better performance level. He said such requirement should be fulfilled by all banks to avoid risks in doing business and to protect depositors' rights as well as give protection to good borrowers.
He told The Daily Observer, "We are getting deposits and our customers doing foreign trade are satisfied with our services." He said, "We have already opened a German Business Desk in our bank to give all out help to customers doing business with German firms. A similar Chinese Business Desk is extending services to customers doing business with Chinese business."
He said MTB's loan-deposit ratio is 97 percent which is at its peak. Its advance deposit ratio (ADR) also has also been adjusted at 85 per cent as per regulatory requirement set by Bangladesh Bank.
The first generation bank's CEO said it is a very important that banks board of directors should closely watch its overall loan operation and how its management is running customers services. He also said foreign financing partners always watch capital adequacy and NPL ratio when they offer lines of credit and trade financing.
MTB is meticulously following these requirements and its rapid rise as one of the country's best performing commercial banks over the recent past has already earned trust from business clients at home and abroad.