Customers' distrust, not liquidity, is banking industry's main problem

Distrust, not the liquidity crisis, among customers is the main problem badly impacting the banking industry, Chairman of Dhaka Bank PLC Abdul Hai Sarker says.

In an exclusive interview with The Financial Express (FE) given ahead of the private commercial bank's 30th founding anniversary, which is being observed today, he said the banking sector is passing the most critical time due to customers' lack of confidence in banking services.

But Dhaka Bank continues to give utmost priority to uphold the trust of its valued customers. Because of this, there has not been a single instance since its inception where a customer of the second generation bank has left without getting money, he said.

"Once we fail, we are finished. So, we are very cautious about it. That is why our customers keep faith in our banking services even in tough times like this," he said.

Mr Sarker, also the chairman of the Bangladesh Association of Banks (BAB), said the liquidity issue is not the major problem the industry faces now.

"It is the distrust among customers in banking services. All stakeholders should work together to bring trust back by any means. If customers lose confidence, it will not be possible to salvage any bank even through fund injections by the regulator and shareholders," the experienced banker said.

He also called upon media personnel to cover bank-related issues more responsibly to avert any form of disinformation that could create panic among depositors.

About the bank's ongoing and future planning, the chairman said the ultimate target of the commercial lender is to transform its services into completely paperless in phases.

Keeping this broader objective in mind, he said, the bank continues to adopt cutting-edge technology to provide financial services digitally to the fast-growing tech-savvy population.

"But we want to bring the transformation in a sustainable way so that both bankers and customers find it easily manageable. Financial matters should not be changed revolutionarily; it is an evolutionary process," he said.

When his attention was drawn to non-performing loans (NPLs), he said the volume of classified loans of the bank stood below 5.0 per cent.

But there are slim chances of recovering the funds as 80 per cent of the bad borrowers either left the country or are on the run after the changeover in state power, he said.

Now, the bank's shareholders are sacrificing their profits to maintain the provisioning requirement against default loans set by the central bank, according to him.

The chairman was too critical about issuing too many bank licences in a small economy like Bangladesh. "If you issue licences irresponsibly, a situation like this will arise."

"A bank is a financial institution, but licences have been issued on political considerations, and these are the carryovers of the wrong planning," he said.

Regarding the Bank Resolution Ordinance through which the central bank would take control of the problem-ridden banks before going for moves like merger-acquisition and recapitalisation, he said there are some government-owned commercial banks that are not in sound financial health.

"Let us bring them back on track first. The government should think thrice before taking control of more banks. It talks more about reforms, but it should start from home first," he said.

About the upcoming amendments to the Bank Company Act where the regulator is expected to reduce the power of shareholders, Mr Sarker said the focus should be on removing the loopholes in the existing laws and implementing the latter strictly.

"Loan defaulters usually get out of the legal charges by using the loopholes in the existing laws. If it stops, I think the recovery of bad loans will go up by 70 per cent," he added.

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