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Banks In The Aftermath of Regime Change

Private sector credit recovery may soon hit double digit: NBL MD

Exclusive Interview

Published : Monday, 28 October, 2024 at 12:00 AM  Count : 378
Shamsul Huda
National Bank Ltd (NBL) Managing Director Md Touhidul Alam Khan has expressed his optimism that the rate of recovery in private sector credit may soon hit double digit.

The private sector credit growth ticked to 9.86 percent in August following the student-led mass upsurge that toppled the Awami League government on August 5.

Md Touhidul Alam Khan sharing his insights on the evolving banking sector with The Daily Observer, said for several months ahead of the August mass upsurge, the private sector credit recovery was much lower due to market liquidity crunch, inflation, and poor banking dynamics.

Khan hopes credit demand will rise with business recovery and rising import financing. However, he said banks should remain cautious due to ongoing political and economic transitions. "Though the credit growth is encouraging, lending decisions require careful calibration," he said.

"With political shifts and evolving market risks, both lenders and borrowers are in a reassessment phase. Banks are adjusting to increased demand while managing liquidity buffers and non-performing loan (NPL) risks, critical for sustainable portfolio growth".

The Bangladesh Bank's tightened monetary stance reflects efforts to curb inflation through interest rate management. "The recent hike in the policy rate to 10 per cent, alongside adjustments to the Standing Lending Facility (SLF) at 11.5 per cent has added cost pressures. 

Besides though the Standing Deposit Facility (SDF) rate devised under Interest Rate Corridor (IRC) is lower than in call money, few banks are putting their excess liquidity money there in Bangladesh Bank instead of call money transactions.  It is a matter of mindset among those banks which undermines interbank liquidity supports under special arrangement despite higher return in call money dealings than in the SDF, Khan observed. 

The National Bank Ltd, Khan noted, is actively enhancing its liquidity management framework.

"The central bank's liquidity interventions have been helpful, but each bank must strengthen its own balance sheet. At NBL, we are improving internal processes to reduce exposure risks, maintain compliance, and align with market dynamics," he emphasized.

The temporary liquidity strain, while a matter of concern, presents an opportunity for systemic reforms and better credit control mechanisms.

Khan also underscored the importance of effective media communication. "Accurate information is crucial for maintaining depositor trust. Sensational reporting could induce unwarranted panic, which the sector can ill afford," he warned.

Despite legacy challenges, NBL continues to prioritize governance and operational efficiency, rebuilding a sustainable track record as a first-generation bank.

Looking forward, Khan expressed measured optimism. "We expect private sector demand to grow further as the economy stabilizes, but banks must carefully monitor liquidity metrics and NPL ratios," he said.

He emphasized that loan growth should align with prudent risk management frameworks, incorporating stress testing and asset-liability management (ALM) strategies.

NBL's strategy focuses on balancing credit expansion with capital adequacy and liquidity ratios, ensuring sustainable growth amid changing macroeconomic variables. With Bangladesh Bank setting a private sector credit growth target of 14.8 per cent for FY2024-25, NBL aims to contribute meaningfully while adapting to tighter regulatory oversight.

Khan concluded by reaffirming NBL's commitment to fostering a resilient banking ecosystem.

"Our focus is on maintaining financial stability, promoting sustainable lending, and preparing for emerging challenges. Through targeted reforms and continuous innovation, NBL seeks to remain a trusted financial partner in Bangladesh's evolving economic scenery."



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