A bank is a financial institution, primary target of which is to gain profit by mobilising deposit. As the market is competitive with more banks for a small economy, bankers are now facing challenges to achieve their targets according to their employers' demands. That is why different types of unethical practices are being employed in the race to bring in more deposits and new clients.
Loan pricing from other banks is one of the core methods. This happens in the following way: let us suppose a business entity named X is availing a cash credit loan facility of Tk 5.0 million from a specific bank. At this point, another bank pursues him and tries to lure him by offering more credit facility from the existing limit against the same collateral security. The primary bank has fixed the loan limit after evaluating the business entity's business volume, credit worthiness, business experience, capability and other parameters. But during loan pricing by the second bank, these aspects are usually ignored. This is why the number of defaulted loans is increasing. Most borrowers do not have sufficient knowledge to gain profit by utilising its credit facilities. Rather they divert the funds to unproductive areas.
This has tempted businessmen to switch from the primary bank after a certain period for more facilities. Such practices are a threat to sustainable development of the Bangladesh economy as both banking and entrepreneurial sectors are being affected.
Any organisation must seek development and profit. But this should be done in compliance of rules, not through shortcut. The unethical race should be avoided. This should be the resolution of bankers and borrowers for 2019.
Md. Azam Khan
Uttara Bank Limited
Chandragonj Branch
Lakshmipur
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