Muklesur Rahman, a top banker with plenty of knowledge and experience working at foreign and local banks, thinks the novel coronavirus pandemic will make the banking industry more dependent on technology.
"Covid-19 has taught us many things," said the managing director and CEO of Shimanto Bank Limited. "It has taught us to change our lifestyles, business models, and, particularly in the banking industry, to adopt electronic payment solutions that maintain social distancing."
Amid this pandemic, people do not want to go to banks; they rather prefer going to ATM booths and logging in to digital banking, he said.
"This [Covid-19] will bring about a paradigm shift to banking operations."
Making necessary reforms and removing obstacles to widespread digitisation can eliminate the dependency on physical branches, Muklesur opined.
"By doing so, banks can improve customer experience and redefine their roles from that of transaction processors to solution providers."
The Bangladesh Bank has already introduced electronic Know Your Customer (e-KYC) services.
"National identity cards will be a key component in this process when customers open bank accounts. Banks need to come up with a procedure to open bank accounts without customers having to visit the branches in person," he suggested.
Muklesur said another lesson banks have learned from Covid-19 is about savings. He spoke about how in India, the savings rate is 36 percent now.
"In Bangladesh, the savings rate is only 27 percent. Now that Covid-19 is making us reduce our expenses, banks can focus on collecting deposits," he said.
Muklesur added that banks have to reduce their operating costs.
"I started my career with a local private bank 36 years ago. I saw competition about good decoration and high expenses between foreign and local banks. Such expenses should be reduced. Banks can even run branches with limited employees using the work-from-home policy."
He said that banks should not be centred in urban areas.
"Exports – banks' biggest business – have fallen, so we need to search for alternatives. We should focus on remittances. To capture this market, we need to develop skilled manpower and utilise the demographic dividend," he said.
Shimanto Bank focuses on all these sectors, said the bank's MD. Owned by the Border Guard Bangladesh Welfare Trust, it received the approval to operate as a commercial bank in July 2016. The bank now has 18 branches; six of them in rural areas.
"However, as a newly established bank, we did not get enough time to implement a single-digit interest rate – we faced tough competition from older banks while collecting deposits. We have to offer comparatively better rates to attract customers from those banks," said Muklesur Rahman, who has worked as the managing director of two new banks in the past six year.
"The free-market economy does not allow interest capping. But here, the government has done this to achieve the Sustainable Development Goals [SDGs], and also to reduce the cost of business," he added.
"New banks need one or two more years of tax benefits and the relaxation of interest capping," he explained.
Terming default loans a "cancer" for our economy, Muklesur said banks are under pressure from such loans.
"All economies have faced this crisis, and they have overcome it. Some countries used asset management companies; we can focus on using them as well."
Shimanto Bank is also lending money under the government's stimulus packages aimed at economic recovery.
However, the bank is maintaining caution while lending under these packages, the managing director added.