Businesses should use funds from stimulus packages properly
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He thinks the stimulus packages amounting to Tk 101,117 crore are the first phase for the economy.
“We do not know whether the funds are sufficient for the economy. The government has declared the packages quickly to tackle the first blow of the fallout.”
The government is now observing the situation and more funds may be required when the economy starts to run in full swing, he said.
The upcoming budget is highly important for the banking sector as well, he said.
Deficit financing will be much higher than the previous ones and this will force the government to borrow heavily from banks.
The authorities should emphasise banks’ liquidity base so that they don’t face any problem in the days to come.
He thinks the deafult loans may increase in the coming days as not all customers will be able to pay back the money on time. This is a normal phenomenon in any recession.
Banks also face some other challenges.
Lenders have been implementing a 9 per cent interest rate on all loan products since April 1. This will gobble up Tk 15,000 crore to Tk 16,000 crore in profits in the banking sector.
Interest incomes account for nearly 70 per cent of the banks’ earnings, while the rest comes from fees and commissions. But the income in the form of fees and commissions have decreased to less than 5 per cent now.
Besides, the central bank has asked banks to avoid compound interest rate on credit cards and this has harmed the revenue.
“So, profitability of banks will face a huge challenge this year,” he said.
Operational costs for banks are almost fixed.
“We have to reduce cost and use our resources efficiently to strengthen the financial health of banks.”
There is no way to keep all the economic indicators in good shape and the government could defer the implementation of major infrastructural projects except the most important ones as revenue would not get a boost in the coming days as the income level of the people from all walks of life is declining.
“This will help free up a good amount of money, which can be used as stimulus funds.”
The government should cut the corporate tax for banks because of their ongoing dire straits, he said. Lenders give 37.5 per cent in corporate tax from their profit.
The central bank may also consider paying interest on the banks’ fund kept as cash reserve ratio.
Digital solutions of every bank have widened due to the ongoing pandemic but this is not enough. They will have to embrace branchless banking.
“We should discourage clients not to come to branches as they can do banking from homes using digital methods.”
All types of products of banks should be rolled out keeping digital solutions in mind, he said.
EBL has benefited immensely from its long focus on digital solutions: its digital banking has increased by 30 per cent during the pandemic.
The balance sheet of EBL is strong and has a reputation both in local and foreign markets as a compliant lender.
The bank is maintaining adequate liquidity, which is helping it to manage the situation smoothly.
“The bank’s capital buffer is very good and is probably the highest in the market. We do not have any provision shortfall. All the financial indicators are very good.”
EBL’s default loan percentage is very low, helping it tackle all challenges excellently.
Defaulted loans at the bank stood at 3.35 per cent of the total loans of Tk 23,205 crore, which is way lower than the industry average of 9.32 per cent.
The performances have helped EBL bag several awards from local and global entities.
The bank received the Bangladesh Best Employer Brand Award 2019 from globally renowned Employer Branding Institute and the ‘Most Innovative Retail Bank – Bangladesh 2019’ award from International Finance magazine.