Finance Minister AMA Muhith on Sunday said they will assign 'a small group' within two months to make the capital market efficient so that entrepreneurs prefer mobilising long-term funds from it for investment.
He, however, did not give any details about the group while speaking as the chief guest at an inaugural session of Annual General Meeting (AGM) of state-owned Janata Bank Limited (JBL) at a city hotel. The function was moderated by JBL Chairman Luna Shamsuddoha.
The finance minister said the commercial banks now focus more on investment financing, which is not a healthy practice in accordance with the existing banking rules.
He said the banks have been making available such finance in the absence of an effective capital market. The government took various measures over the years like formation of the BSB (Bangladesh Shilpa Bank), the BSRS (Bangladesh Shilpa Rin Sangstha) and the ICB (Investment Corporation of Bangladesh) to this effect to offer alternatives for long-term financing.
"But we're yet to achieve success at the expected level. We decided to assign a small group within two months giving them the responsibility to create an efficient capital market that would offer long-term financing," he said.
Mr Muhith said besides the capital market, the government tried hard for a vibrant bond market but the progress has not been up to the mark.
Calling upon the private sector, the finance minister said the country has enough business houses who can contribute to the bond market.
Talking about the challenges of an election year, he said inflation needs to be kept under control and the rate of interest will be a key here.
"I am very happy that bankers pledged and decided to bring down the interest rate to single-digit within a month. It was not fair on their part to suddenly increase deposit and lending rates simultaneously. Anyway they (bankers) finally understood it," he said.
About bad loans, which is a major headache for the commercial banks, the finance minister said the burden of classified loans (over 10 per cent) is quite big but not as big as it was 40 per cent when he had become a minister.
"I hope it will be reduced to single-digit soon," he added.
The finance minister, however, did not see any possibility of country's economic growth slowing down in the election year. "I think the economy will grow further by 0.2 or 0.3 per cent over that of the last year."
Acting Secretary of the Finance Division under the Finance Ministry Mohammad Muslim Chowdhury laid emphasis on immediate restructuring of the traditional banking service to cope with the challenges in the era of technological revolution.
He said banks were forced to use core banking software to cope with the rapidly changing technology and banks need to think whether branch-based performance both for deposits and lending will go side by side if they fully apply software.
"Moreover, the deposit collection will be the jobs of the salesmen, not for the bankers. So, you have to have a separate group of people for that job," he said.
He said industrial and project financing should be done by mobilising funds from the capital market or issuance of long-term bond instruments. On deposits, the banks have to concentrate more on SMEs and medium industries.
"The so-called branch banking over the counter service will cease to function in the coming years because of technological revolution. Time has come for institutional reshaping and overcoming the challenges," Mr Chowdhury said.
Talking about weak points of state-owned commercial banks, senior secretary of Financial Institutions Division Eunusur Rahman said the banks collect deposits from all over the country but provide finance to a small group of people, which creates obstacle to balanced development.
He said the growth of the banking sector was around 300 per cent since 2008 and the volume of deposit stood at Tk 9.5 trillion in 2017 from Tk 3.0 trillion ten years ago.
Speaking as the special guest, Bangladesh Bank governor Fazle Kabir said the Janata Bank made operating profits worth Tk 11.71 billion in 2017, but after provisioning the volume stood at Tk 970 million because a large volume of classified loans (82 per cent) turned bad.
At the same time, the BB governor said capital deficiency and classified loans have emerged as two key challenges for the bank. The volume of capital deficiency rose to Tk 1.61 billion while CL (classified loan) was around 14.2 per cent or Tk 58.19 billion.
"The bank has to overcome these challenges while it failed to meet some targets of 2017 in accordance with MoU signed with the BB," he said.
Mentioning various progresses achieved by the bank in the past year, JBL Managing Director and CEO (chief executive officer) Abdus Salam Azad said the bank saw 112 per cent growth in terms of operational profits in 2017 while ADR (advance deposit ratio) rose to 71 per cent in 2017 from 62 per cent a year ago.
He said the number of loss-making branches came down to 57 last year from 99 in 2016.
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