Ahammad Parvej Khan
The country’s banking sector experts on Monday expressed mixed reaction over the international rating organization, Moody’s observation, on banking sector risk in Bangladesh.
Referring to the Moody report that Bangladesh’s banking sector will have to face a negative impact in the near future because of its ever-growing non-performing loan (NPL), and downward trend of capital reserve and profitability, experts warned the commercial banks to be careful in further credit disbursement, and to bring diversification in products for strengthening profitability.
Eminent economist and former Adviser to a caretaker government, Prof Dr Wahiduddin Mahmud told Bangladesh Post,he had warned the banking sector to take necessary measures because he knew that some international rating agencies, including ‘Moody,’ had been observing the activities in the banking sector.
Moody’s report mentioned that the economy in Bangladesh is doing much better, there is a huge amount with banks, also being used in development works of the government, but the true picture in the banking industry is very weak, that will create a negative impact soon.
Former finance adviser to a caretaker government and leading economic analyst of the country, Dr Mirza AB Azizul Islam, found the findings of ‘Moody’ on the banking industry of Bangladesh correct.
He told Bangladesh Post, the NPL in banks is growing every day, similarly if the rescheduling and restructuring increases, the situation will turn worse rapidly. “Credit is the major source of income of the banks, so remarkable failure in recovery would put the banking sector in severe risk no doubt,” Dr. Aziz opined.
Moody’s has made its remarks after reviewing the activities of banks in Bangladesh in six indexes.
The report also mentioned severe deterioration of the qualitative standard of assets in banks saying if the situation continues, the credit expenditure will keep increasing and profit ratio will go down, and gradually the negative impact will become clear in the banking industry.
Moody’s basically prepared the report basing on the criteria like environment of bank management, asset risk, profit and skill, capital, investment and liquidity and government support.
Regarding public sector banks, the Moody’s report mentioned that the ratio of NPL was 10.40 last June due to lack of good governance. The excessive NPL would contribute to increased rate of interest and also reduce the ratio of profit.
Meanwhile, defying the finding of Moody’s, Managing Director and CEO of Sonali Bank Limited, Obaied Ullah Al-Masud told Bangladesh Post, the position of most public sector banks is much stronger at present.
“Moody’s has lack of true information. In fact, good governance prevails full-fledged in public sector banks, and the position of Sonali Bank Limited is now the strongest. The capital shortfall which is exposed outwardly is not the same in the true sense”, MD and CEO of the largest nationalized commercial bank said.
Managing Director and CEO of Brac Bank Limited, Selim R F Hossain said that international rating agencies like Moody’s usually run their assessment as per their metrics, but we must say that we have some stresses in our banking sector, I have no arguments in this regard.
“But what is important, we have to improve our corporate governance significantly which is now a bit weaker. Our central bank and the government itself is also doing the same, and it is hoped that the situation will get an expected change in the days to come,” Hossain added.