When Syed Abu Naser Bukhtear Ahmed took over as the CEO of state-run Agrani Bank in October 2004 under a World Bank-funded reforms project, daunting challenges awaited him. He inherited a balance sheet full of negative figures. By the time he finished his tenure on September 30 2007, some indicators, including capital adequacy ratio, non-performing loans and profits, showed improvement.
Ahmed was reappointed the CEO of the bank in April this year after the bank had been transformed into a public limited company: meaning a board of directors will run the bank, not the finance ministry.
The CEO now in his second stint with the bank has vowed * to improve all indicators, say ing there will be no negative figures, just after two and a half years, in 2010.
Isn't it tough for a bank with a capital shortfall of around Tk 1,000 crore and default loans of aboutTk2,500 crore?
The bank plans to go tough with tire top defaulters who avoid repayment by filing writ petitions with the courts. Some 20 defaulters account for the bank's 40 percent of Tk 2,500 crore default loans. Nonpayment of big loans has been widening the bank's capital shortfall.
"Big defaulters do not
repay the loans. They file writ petitions and pay hefty fees to their lawyers,” CEO Ahmed said.
He warned the big defaulters, saying, "There will be no mercy for them."
He however did not forget to appreciate small borrowers. "Small loan recipients hardly become defaulters, but the rich, who ride in posh cars and send their children abroad for education, love to
become defaulters," Ahmed said.
Agrani Bank has 866 branches strategically located in almost all the commercial areas throughout Bangladesh and 11,345 employees. As on December 31, 2007 the bank's deposit stood at Tk 13,560.92 crore and the advances Tk 11,088 crore.
In 2007, the bank's operating profit was Tk 527 crore from Tk 359 crore in.2006. The
bank has setTk 600 crore as its profit target in the current year.
. Like other government banks, Agrani also faces the same situation when it comes to loan disbursement. Undue influence from corrupt politicians and bureaucrats has made the bank's nonperforming loans larger.
As a result of pressure from the World Bank and the International Monetary Fund
the government in November of last year made Agrani Bank, along with two other national-ised commercial banks (Sonali and Janata ), public limited companies to improve their performance.
Capital shortfall has remained a big problem for the bank for years. Currently, Agrani's capital shortfall stands at aboutTk 1,000 crore.
“This shortfall will be filled by next year, even if the government doesn’t give us the money," Ahmed asserted.
"There was no provision against classified loans when I took over in 2004. I have already allocated Tk 1,200 crore as provision against classified loans," he said.
“I have a plan to allocate Tk 2,000 crore as provision against classified loans by 2009,” he categorically said.
The CEO however believes his main challenge will be to recover bad loans.
As on December 2007, loan repayment of Tk 3,167 crore remains pending with some 7,470 court cases. In 2007, the bank realized Tk 3.17 crore
against a targeted Tk 19.8 crore from 20 top defaulters. On the other hand, the bank received Tk 215.82 crore out of a targeted Tk 275 crore from other defaulters.
Some of the bank's big defaulters are on the run, which the CEO termed as another major reason for the bank's poor performance in achieving the loan recovery target.
The CEO said his main task during the first term at the bank would be to reconstruct business plans.
Regarding his second phase at the bank, he said he wants to restructure the capital base in order to reduce the capital shortfall.
Amount of credit to agriculture and small and medium enterprises should be raised to increase the profit of the bank.
“I have told the board of the bank that we need to disburse more loans to agri and SME sectors instead of giving big loans to big factories,” he said.
He also plans to bring some 100 branches under automation by the end of2008.
The bank needs to recruit fresh people as many have already left the bank in search of higher salary. “We the three state run banks — Sonali, Janata and Agrani -- plan to offer special allowances to our staff," Ahmed said.
sajjad@thedailystar.net