New banks to enhance unfair competition: Hafiz Majumdar

DHAKA: Ruling party legislator and chairman of Pubali Bank Hafiz Ahmed Majumdar in an exclusive talk with Banglanews discussed about the varied issues of the country’s banking sector particularly the impacts to be created after the launching of the newly approved nine banks, high rate of interest of bank loan and future planning of Pubali bank.

He had been in various export businesses for the last 35 years also contributed in readymade garments and tea industry. Besides, he is involved with various social activities. He has been also contributing in improvement of quality education in Sylhet.

Recently, at the Pubali Bank head office located in Dilkhusha C/A Banglanews Staff Correspondent Tahzib Hassan took the interview of Hafiz Majumdar.

Banglanews: Recently government has accorded permission for nine new banks. What situation will arise when these banks start functioning?

Hafiz Majumdar: My personal opinion is that these will invite unfair competition in the banking sector. At the moment banking sector is doing well. The new nine entrants will put it in a bigger competition. Maximum competition means enhancement of rate of interest. Interest will be accrued at a higher rate. Bank loan will be given at a high interest rate. There was no need of new banks. Bangladesh Bank objected to giving permission for new banks. I do politics. Moreover there were political reasons behind the permission for new banks.

Banglanews: Finance Minister Abul Mal Abdul Muhit earlier said that there was political pressure for giving permission for new banks. The political leaders and activists are directly or indirectly involved with the new banks. Will the new banks can earn the confidence of the customers.

Hafiz Majumdar: There are some matters here. The new banks will have to bring Taka 400 crore as capital each. The source of that capital must be disclosed. We did not have to do that. How they will observe the formalities it will be known after they start functioning.

Banking sector is very much sound here now which is performing well. In Europe banks are collapsing one by one. If any bank in our country collapses our government cannot save it. In Europe there crises in a number of banks. There are World Bank, International Monetary Fund (IMF) and other institutions  to help them. Who is here to help us?

Problem will arise when new banks will make their entry in the market. The banks who are performing well now will also face problem.

Banglanews: Do you have any suggestion?

Hafiz Majumdar: Government should have consulted the bank experts. Because the government is consist of persons of different professionals. The politicians must do something beyond the suggestions of the experts. But that must have a limit. Government must look into the matter that the new banks are observing the rules and regulations strictly. Bangladesh Bank (BB) is our controlling authority. Bangladesh Bank (BB) is doing their job perfectly. Due to Bangladesh Bank’s vigilance as per the instructions of World Bank, banking sector is performing very well. No bank will collapse if it follows the instructions accordingly. Our banks are not complicated like the western banks.

The western banks do not follow the old practices like us. As for example they finance some one taking a bridge as security, which we do not. World Bank cannot control the total loan. For this reason many big banks collapsed across the world. The risks of our banks are less. The control of banking sector is stronger than before.

Banglanews: The bank’s interest rate is higher as well as the lending rate is also higher. The investors opined that the lending interest rate is not investment friendly. Tell something on it.

Hafiz Majumdar: This is very much true that the lending interest rate is not investment friendly. In the first quarter of the current year the rate of interest has gone up much. When the interest on deposit increases, interest rate on lending automatically goes up. We all are very much anxious about it. We spend less in collecting deposits than any other bank. Because Pubali Bank has many a more branch across the country. For this reason we get deposits at a lower expenditure. Total costs of our deposit collection are minimal. That helps us providing loan in lesser interest rate.

If a customer is given loan at a higher interest rate the chance of defaulting increases. The loan beneficiary also faces much problem in repaying the loan. If anyone becomes defaulter bank faces more hassle than the defaulting customer.

Banglanews: What rate of interest will be investment friendly in a developing country?

Hafiz Majumdar: My personal opinion is that it should be of single digit. Investment will be discouraged if bank interest rate becomes higher. I cannot reduce the interest rate if I alone desire. There was an urge from Bangladesh Bank and we also wanted to make single digit. But for many reason we failed to do that.

According to Bangladesh Bank regulation we cannot give more than 82 percent of the savings deposit. Even 85 percent can be allowed. But many banks exceed even 85 percent. That pushes banking sector into risks. It should be strictly controlled.

Banglanews: If Bangladesh Bank gives a guideline that none will impose interest rate than the specified rate. Is it logical If there is any regulation from BB?

Hafiz Majumdar: This type of guideline is not allowed in a free economy. This will run at its own pace. If we control it within a definite boundary that will not bring positive results for the economy. It should be allowed to run as per its own speed.

Country’s economy is moving ahead. Private sector is booming and their economy and demand of money is also increasing than before. But there is shortage of money supply than demand.

Banglanews: Is Bangladesh Bank doing excesses in controlling the commercial banks?

Hafiz Majumdar: It is natural that men do mistakes. But from greater perspective they (BB) they are simply doing their job very efficiently. The control of BB is very much satisfactory. This control has kept the banking sector safe. This is a good aspect. We do business taking the money of others. We are happy with the controlling features of BB.

The service rendered by banks is improving day by day. People want various facilities. They want internet facilities in banking trading. The banks also fulfilling their demand as they want. There was a time when expatriates faced lot of problems in sending money to their country. Now it is being done at a very shortest time. Mobile banking has been introduced. There is no need of coming to banks now physically. Banking facilities can be obtained sitting in home. Earlier money used to come from abroad through ‘Hundi’. But with the improvement of banking service ‘Hundi’ system is less practised now.

Banglanews: Tell something about the present scenario of country’s banking sector.

Hafiz Majumdar: Every bank of the country is making huge profit. I think that their profit is really big. Pubali bank has earned a profit around Taka 600 crore in the last fiscal. We have set a profit target of Taka 900 crore in the current year. All banks are doing huge profits like Pubali Bank.

Banglanews: How is doing your bank?

Hafiz Majumdar: We are getting sufficient deposits. Bank lending is going up. That is helping us to make big profit. Last year our target of deposit was Taka 12 thousand crore while the target has been fixed at Taka 18 thousand crore for current year. Not only Pubali bank but all are doing well.

Many speak of liquidity crisis. But this is simply artificial and imaginary. There is not that much strong liquidity crisis as it is publicized.

Hafiz Majumdar: What measures you are going to take in modernizing Pubali Bank?

Hafiz Majumdar: Steps have been taken to make all branches computerized. Meanwhile more than three hundred branches are within the network of computerization facilities. The rest will be brought into on- line facilities within next December. We have built up our own software for the purpose. Only Pubali bank uses its own software in banking activities in this country while other banks use software procured from outside. We frequently check our software to keep it free from errors and make it sufficiently efficient. Because in banking activities software is very important. There might occur huge financial loss if software catches a fault.

Banglanews: Tell something about Corporate Social Responsibility (CSR) of Pubali Bank.

Hafiz Majumdar: Pubali Bank has so far donated Taka 10 crore to Ahsania Mission cancer hospital and Taka 6 crore to Sylhet Heart Foundation. Besides, the bank provides services in case any natural disaster in the country and also plays important role in various social development activities.

Banglanews: Say something on future planning.

Hafiz Majumdar: My motto is to make Pubali bank a place of trust. Everybody knows that Pubali bank does not believe in aggressive banking rather it practices the theory of conservative banking. We do not cross the limit the ratio of lending and collection.

Banglanews: Thanking you.

Hafiz Majumdar: Also thanks to you.

BDT 0740 HRS JULY 16, 2012  

Translated and Edited by Shahjahan