State-owned Agrani Bank is reducing its high-cost deposits to minimise the burden of liabilities in the wake of a fall in profitability in the entire banking sector due to the existing investment slowdown.
Agrani Bank’s outstanding deposit soared to Tk 35162.07 crore in September this year from Tk 33429.89 crore in the same period last year, according to data available from Bangladesh Bank (BB).
On the other hand, loans and advances at the state-run bank stood at only Tk 22337.97 crore in this September, reports the Daily Sun.
Double-digit interest on deposits created burden for the bank when rate of interest on industrial and other credits is falling due to the investment slowdown prevailing over the last couple of years and hitting banks’ profits.
Talking with daily sun, Agrani Bank’s acting chair (of board of directors) Arastoo Khan admitted that the board and the senior management have agreed to release high-cost deposits—mainly term deposits bearing above 10 percent interest.
He said the entire banking sector has been hit hard by the prolonged investment stagnancy, which resulted in a fall in banks’ income from investment and term loans.
In the September (2014) edition of monthly review, Bangladesh Bank (BB) data show that the growth in credit to the private sector stood at only at 1.07 percent at the end of August, which portrays the current investment scenario.
Khan said “As a bank, we must plan for maximize profit and minimising cost. We are doing this for the benefit of the bank.”
“If we can successfully reduce the burden of high-cost deposits, we could also reduce the rate of interest on credit schemes and people will be able to get loan from banks at lower cost,” he said.
He said his bank is adopting prudent policies as per the central bank guidelines to ensure credit to the genuine entrepreneurs and prevent loan forgeries.
“My tenure is very temporary and I will try to maintain healthy practices in granting loans by establishing good governance,” he said.
The bank’s operating profit during the July-September period fell to Tk 188.41 crore this year from Tk 285.10 crore during the same period a year ago.
When contacted, the banks’ high-ups, however, said they have been getting requests from entrepreneurs for loans for fresh investment that shows a sign of recovery from the investment slowdown.
“We are optimistic about a rise in banks’ investment as the political climate remains calm since January. Entrepreneurs started to come for loans and submitting ideas on prospective investments,” said a high official of Agrani Bank.
The official said a vested quarter is trying to destroy the reputation of the bank by carrying out propaganda on loan issues.
“Political influences always act in favour of the loan-seekers. This is not a new phenomenon. But the important thing is how efficient we are in protecting our assets,” said the official.
The official said some opportunists had tried to defame the banks’ board and senior management on the issue of granting loans on behalf of owner of Sunmoon Plaza located at Motijheel. “But, I would say the loan is properly secured as per the regulatory norms. The deficiencies in loan granting and disbursement procedures identified by the central bank are legal issues that need court’s interference to be settled,” said the official.
He said the Agrani Bank is financing the Bangladesh Petroleum Corporation by facilitating payments for petroleum imports.
“Among the state-owned banks, Agrani is showing the best performance in channeling remittances,” said the official. BB data show that the bank has handled Tk 9925 crore in remittances in last nine months of the current calendar year. The entire year’s target is Tk 16,000 crore.
Last year, the bank’s total remittance handling amounted to Tk 12721 crore, according to BB data. Agrani Bank officials said the bank’s export financing from January to September stands at Tk 6420 crore with import financing of Tk 12115 crore.
The bank’s performance in loan recovery was significant till September 2014 with an actual achievement of Tk 367.34 crore against the entire year’s target of Tk 562 crore.
“We are working hard to realise written-off loans,” said a high official of the state-run bank.