Scams, professional shortage trouble banking sector
Lutfor Rahman Badal, chairman of the executive committee of IFIC Bank, talks about the problems the banking sector is now facing in a recent interview with New Age. Interviewed by Ahmed Shawki
New Age: What is the present situation of the country’s banking sector?
Lutfor Rahman Badal: The present situation of the banking sector is not good as banks are facing various troubles. The recent scams in the state-run banks have exposed the sector to risk. And the number of banks is increasing without having enough professionals to manage the sector efficiently. Since banking is a business which you run by taking money from others, you should have to be very careful in using the money as your depositors expect the best use of their money in order to get best return. But, now the sector can not use depositors’ money properly. A very light business environment of the country is also intensifying the problem of the sector.
NA: What are the reasons behind the current vulnerable situation of the banking sector?
Lutfor: Lack of efficient manpower is one of the key problems. The growth of the banking industry was very rapid over the last two decades, but during the period we could not ensure proper infrastructure for the industry. In many cases we see that people who do not have academic background in banking or finance are holding the key chair in the leading banks, especially in the state-run banks. We have also failed to set up enough institutions to produce quality banking professionals. The government’s policies and the emerging economic challenges have caused troubles for the sector since we don’t have efficient people to face the problems.
NA: What could be the steps to overcome these problems?
Lutfor: The government’s piecemeal solutions, like injecting funds into the state-run banks in trouble, will never heal the cause of the problem. Such remedies will encourage lack of professionalism in the sector as weak management would take these as exit routes. A coordinated policy of all the financial institutions is needed to ensure proper banking.
NA: What is your observation on the latest bank company law?
Lutfor: I think it is well drafted, but there are some loopholes like the tenure of directorship. As per the law, I have to quit as a director after six years. But, such a situation would arise that no alternative would be found. In that situation, it will not be wise to leave the directorship just for the sake of law to someone who is not qualified. There are around 800 directors in the entire banking industry. If 80 of them are engaged in unlawful activities, the government should not punish the entire community for the misdeeds. Only the directors who misused their position and power should be punished.
NA: What do you think about the new banks which were given licences on political consideration?
Lutfor: The new banks will create unhealthy competition. The market is still an urban-based one and too many banks will try to sell their products in the area which eventually reduces banks’ profit. Customers will be benefited, but some banks will sink after few years if the situation goes on like this.
NA: What is your opinion about excessive funding and sudden withdrawal of the fund by banks from the stock market in 2010-11 which caused a market crash?
Lutfor: I disagree that banks were responsible for the stock market crash. The problem was lack of the depth of the market. Too many people were trying to buy too few shares which caused the bubble and the consequent burst.
Banks’ funding to the market was done in two ways. One was direct investment and another was through their merchant bank wings by providing loans to investors. Banks’ own investment in the market was not much and most of the banks increased their own investment in the market during the crash. The merchant banking is tricky; if your client is eligible for loan, you can not deny them. Our stock market is dominated by retailers; if banks controlled the market, it would have never collapsed like this. The banks sector was the worst sufferer of the stock market collapse.
NA: There are many criticisms on your role in the stock market and the government probe committee on the 2010-11 market crash alleged that you made excessive investment. How do you react to the allegation?
Lutfor: Firstly, I want to say that the probe committee report could not place any specific allegation against me. Investing more money in stocks can not be a crime. The regulators conducted numerous investigations into my bank account and share transaction documents. If I was guilty, I wasn’t giving you the interview today.
I was a political victim. I have business partnership with an opposition party leader which was the main reason for raising allegation against me. Some journalists and other people fount it convenient to push the opposition to a tight corner by putting my name in the stock market scam, though I am not a political person.
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New Age: What is the present situation of the country’s banking sector? Lutfor Rahman Badal: The present situation of the banking sector is not good as banks are facing various troubles. The recent scams in the state-run banks have exposed the sector to risk. And the number of banks is increasing ... Full story
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