About credit cards and consumer loans
Thursday, 30 October 2008
Ahmed Showkat Masud asks
THE banking sector in our country has been going through changing regulations for implementation of Basle-II. Banks are under pressure to raise their paid-up capital. Regulations are changing. On their part, banks are, however, trying their best to serve the customers of all segments. Competition has been intensifying. Non-banking financial institutions are active to "grab" the market of both depository customers and borrowing ones. Banks are serving not only the corporate clients but also the small and medium enterprises (SMEs).
Besides these, individual customers are there who are getting services from banks. By evaluating customers' creditworthiness, banks are applying proper methodologies. Innovation of new products is there for serving different segments of customers. Banks receive loan requests from all segments of customers. How such requests will be handled by banks depends on bank personnel's efficiency in evaluation and processing of numerous loan proposals.
The central bank has been giving emphasis on disbursement of loans to productive operations like those involved in private sector and agricultural activities. This is an welcome directive to banks, no doubt. But the question is, if individuals deposit their money to the banks and financial institutions (NBFIs), why should not they expect getting loans from the depository institutions? Every bank's has its retail banking division. Banks give loans to individuals and families.
Giving loans to credit card users and consumer credits to individuals are more profitable for banks. Since such types of loans are more risky, interest charged to these loans are high. We have to look at the segments of clients who are customers of credit cards and consumer loans. Both the affluent and the needy people are the customers of these products.
In an economy where middle-class people do often face problems of not having enough hard cash to meet their needs, why should these types of loans -- that is, credit cards and consumer credits -- should be discouraged. If the money is spent on buying consumer durables or meeting emergency needs like hospitalisation, why should such sorts of spending be treated as unproductive? By helping to diversify the loan portfolio of banks, credit cards and consumer loans play a big role. If foreign banks can give these services, why can't the local banks provide the same to their customers? Foreign banks have introduced these products among their customers. Local banks are the followers. Productive sectors should get priority. It is all right But who will buy the products?
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The writer works with AB Bank Ltd., Anderkilla Branch, Chittagong
THE banking sector in our country has been going through changing regulations for implementation of Basle-II. Banks are under pressure to raise their paid-up capital. Regulations are changing. On their part, banks are, however, trying their best to serve the customers of all segments. Competition has been intensifying. Non-banking financial institutions are active to "grab" the market of both depository customers and borrowing ones. Banks are serving not only the corporate clients but also the small and medium enterprises (SMEs).
Besides these, individual customers are there who are getting services from banks. By evaluating customers' creditworthiness, banks are applying proper methodologies. Innovation of new products is there for serving different segments of customers. Banks receive loan requests from all segments of customers. How such requests will be handled by banks depends on bank personnel's efficiency in evaluation and processing of numerous loan proposals.
The central bank has been giving emphasis on disbursement of loans to productive operations like those involved in private sector and agricultural activities. This is an welcome directive to banks, no doubt. But the question is, if individuals deposit their money to the banks and financial institutions (NBFIs), why should not they expect getting loans from the depository institutions? Every bank's has its retail banking division. Banks give loans to individuals and families.
Giving loans to credit card users and consumer credits to individuals are more profitable for banks. Since such types of loans are more risky, interest charged to these loans are high. We have to look at the segments of clients who are customers of credit cards and consumer loans. Both the affluent and the needy people are the customers of these products.
In an economy where middle-class people do often face problems of not having enough hard cash to meet their needs, why should these types of loans -- that is, credit cards and consumer credits -- should be discouraged. If the money is spent on buying consumer durables or meeting emergency needs like hospitalisation, why should such sorts of spending be treated as unproductive? By helping to diversify the loan portfolio of banks, credit cards and consumer loans play a big role. If foreign banks can give these services, why can't the local banks provide the same to their customers? Foreign banks have introduced these products among their customers. Local banks are the followers. Productive sectors should get priority. It is all right But who will buy the products?
...........................................
The writer works with AB Bank Ltd., Anderkilla Branch, Chittagong