SCBs giving in to PCBs
Saturday, 19 September 2009
Sheikh Shahariar Zaman
State-owned commercial banks (SCBs) have been losing ground to private commercial banks (PCBs) in their transactions and according to an official data, deposit and lending position of SCBs showed a dismal performance up to June, 2009 as they trailed behind the PCBs by a large margin.
The deposit position of SCBs until June 2009 stood at Tk 840 billion and loans and advances Tk 495 billion while the PCBs deposit was Tk 1,600 billion and lending Tk 1,388 billion, according to the data.
The advance of the SCBs was 59 per cent of their total deposit while it was 87 per cent of the PCBs, the data revealed.
The finance minister in the parliament recently attributed the SCB's poor performance to inefficient service, limited products and lengthy processing of loan applications.
The main problem of the government-owned banks is its board of directors, Bangladesh Krishi Bank chairman Khondkar Ibrahim Khaled told the FE.
"Deposit and lending are the two primary functions of any bank and these two indicate how good or bad is a bank's performance," he explained.
The former Bangladesh Bank deputy governor said many bank directors are not competent enough to be in the boards and give policy direction to its management.
"The management of the SCBs is competent but they lack policy guidelines from the boards and undergo too much control from the government," he said.
The PCBs enjoy almost no political influence in their operations and it is the primary reason behind the difference between the PCBs and the SCBs, he added.
Most of the bank directors are serving or retired bureaucrats and they do not have any stakes in the banks, he pointed out.
In many cases, the boards interfere in the activities of the management instead of explaining to them their weaknesses, he said.
"The boards can take the initiative to develop new products to provide better and quick services to their clients and the if management does not perform well, action can be taken against them," he said.
The number of SCBs branches up to July this year were 3,347 whereas the number of branches of PCBs was 2,142.
Although the number is much lower for the PCBs but they are doing better business as their respective boards, in most of the cases, allow freedom to the management in operational matter, he said.
"When I was the managing director of Pubali Bank in the 90s, the board of the bank give me a free hand to operate," he added.
The large private sector bank was a losing concern in the 80s before it was privatised but there was a tremendous turnaround after the private sector took over the bank, Mr Khaled said.
The SCBs can also make the same turnaround if the members of the boards are competent and the management is efficient, he said.
About the recent appointments of directors at the SCBs, he said the government could have appointed political persons with proper background to the boards.
"The government should have appointed right men in the right place to make the country's banking system effective," he said.
Dr Abul Barakat, professor of economics at Dhaka University, was appointed chairman to Janata Bank, Prof Khandaker Bazlul Haq, president of Dhaka University Teachers Association, was made chairman of Agrani Bank, Abdul Hye was made chairman of BASIC Bank while Kazi Baharul Islam who is a former official of Sonali Bank got the charge of the same bank.
"The chairmen of the SCBs and specialised banks are communicating with each other individually and private capacity to make the public sector banks vibrant," he said.
State-owned commercial banks (SCBs) have been losing ground to private commercial banks (PCBs) in their transactions and according to an official data, deposit and lending position of SCBs showed a dismal performance up to June, 2009 as they trailed behind the PCBs by a large margin.
The deposit position of SCBs until June 2009 stood at Tk 840 billion and loans and advances Tk 495 billion while the PCBs deposit was Tk 1,600 billion and lending Tk 1,388 billion, according to the data.
The advance of the SCBs was 59 per cent of their total deposit while it was 87 per cent of the PCBs, the data revealed.
The finance minister in the parliament recently attributed the SCB's poor performance to inefficient service, limited products and lengthy processing of loan applications.
The main problem of the government-owned banks is its board of directors, Bangladesh Krishi Bank chairman Khondkar Ibrahim Khaled told the FE.
"Deposit and lending are the two primary functions of any bank and these two indicate how good or bad is a bank's performance," he explained.
The former Bangladesh Bank deputy governor said many bank directors are not competent enough to be in the boards and give policy direction to its management.
"The management of the SCBs is competent but they lack policy guidelines from the boards and undergo too much control from the government," he said.
The PCBs enjoy almost no political influence in their operations and it is the primary reason behind the difference between the PCBs and the SCBs, he added.
Most of the bank directors are serving or retired bureaucrats and they do not have any stakes in the banks, he pointed out.
In many cases, the boards interfere in the activities of the management instead of explaining to them their weaknesses, he said.
"The boards can take the initiative to develop new products to provide better and quick services to their clients and the if management does not perform well, action can be taken against them," he said.
The number of SCBs branches up to July this year were 3,347 whereas the number of branches of PCBs was 2,142.
Although the number is much lower for the PCBs but they are doing better business as their respective boards, in most of the cases, allow freedom to the management in operational matter, he said.
"When I was the managing director of Pubali Bank in the 90s, the board of the bank give me a free hand to operate," he added.
The large private sector bank was a losing concern in the 80s before it was privatised but there was a tremendous turnaround after the private sector took over the bank, Mr Khaled said.
The SCBs can also make the same turnaround if the members of the boards are competent and the management is efficient, he said.
About the recent appointments of directors at the SCBs, he said the government could have appointed political persons with proper background to the boards.
"The government should have appointed right men in the right place to make the country's banking system effective," he said.
Dr Abul Barakat, professor of economics at Dhaka University, was appointed chairman to Janata Bank, Prof Khandaker Bazlul Haq, president of Dhaka University Teachers Association, was made chairman of Agrani Bank, Abdul Hye was made chairman of BASIC Bank while Kazi Baharul Islam who is a former official of Sonali Bank got the charge of the same bank.
"The chairmen of the SCBs and specialised banks are communicating with each other individually and private capacity to make the public sector banks vibrant," he said.