Prime bank to prioritise digital banking as pandemic could change transaction behaviour
In an exclusive interview with The Business Standard, Prime Bank Managing Director Rahel Ahmed speaks about how the bank is preparing to face the aftermath of Covid-19
Prime Bank will enhance its digital banking services instead of conventional banking to reduce operational costs and cope with changes in transactional behaviour of customers after the coronavirus pandemic, said Managing Director Rahel Ahmed.
Thebank recently marked its 25th anniversary on April 17. Like everyone else, however, the bank had to cancel all celebrations due to the Covid-19 pandemic that has resulted in a nationwide shutdown and affected most businesses, including banks.
At 48, Rahel Ahmed is the youngest managing director in the sector, and he is also the general secretary of the Association of Bankers, Bangladesh (ABB).In an exclusive interview with The Business Standard, he spoke about how Prime Bank is preparing to face the aftermathof Covid-19.
"The coronavirus pandemic has brought a massive change in transactional behaviour of customers, making them heavily dependent on digital banking services," he said. "This is a great lesson,suggesting banks to come out of conventional banking."
For instance, Prime Bank experienced 10,000 new registrations in internet banking from its clients in April. This reflects that people are adopting digital banking services fast. So, thebank is planning to expand its digital banking activities. It has already sought agent banking licences from the Bangladesh Bank.
Liquidity management will be a great challenge for the banking sector after the coronavirus pandemic. From this aspect, Prime Bank is planning to introduce new products targeting small depositors in order to keep deposit growth sustainable after the pandemic. In order to bring small savings under the banking channel, the bank will introduce a new product named "women banking" to target housewives.
"The product will also enhance easy access to credit for small savers," Rahel Ahmed added.
Prime Bank is also planning to increase the ratio of current accounts to savings accounts in order to reduce deposit costs, he said. Currently, that ratio stands at 31-32 percent, which can be improved byan additional1-2 percent, he said.
The bank also has a target of retaining the default rate within 5 percent.
"Another priority should be improving operational efficiency to reduce costs as business volume of the banking sector will fall significantly due to the global economic crisis caused by Covid-19."
He said the banking sector was already in a vulnerable situation as it had to cope with the newly implemented single-digit lending rate. But the coronavirus attack has further worsened the situation.
"The pandemic has entirely changed the country's economic scenario and now it is time for banks to prepare themselves to support the economy by ensuring liquidity supply."
Initially, the Bangladesh Bank's measures like cutting down repo rate and cash reserve ratio helped banks to hold a comfortable liquidity position, Rahel said. But banks may need further easing of regulatory requirements, depending on how long the current shutdown prevails.
"Cash holding tendency amid the economic crisis will hurt bank's deposit growth. Moreover, foreign currency earning sources like remittance and export will remain down. Amid this situation, implementing stimulus packages and a borrowing tendency after the pandemic will put pressure on liquidity of the banking sector," Rahel stated.
So, it will be a bigger challenge for banks to ensure liquidity, he added.
Rahel Ahmed said Prime Bank has focused on money management to face the aftermath of the coronavirus crisis. "The bank has been managing a comfortable liquidity position and maintaining lower advance deposit ratio than the regulatory limit."
When most of the banks were in a liquidity crunch, Prime Bank was in comfortable position due to efficient money management. As a result, depositors' confidence on the bank is high, according to the managing director.
"The bank avoided an aggressive lending approach and maintained quality lending,which helped it earn good interest in the last couple of years."
Rahel Ahmed is a career banker and has successfully worked as the deputy managing director and chief business officer of the bank since joining it in early 2015. He has played a key role over the last almost 3 years in leading the "Business Model Restructuring and Centralization" programme for Prime Bank.
Under his leadership, Prime Bank's operating profit grew at 20 percent, although the banking sector has been passing through a difficult time in the last two years.
With 146 branches, 170 ATM booths and powered by more than 3,200 passionate employees, the bank has established its unique mark in corporate, consumer, SME banking and treasury segments.
The total deposit of the bank stood at Tk20,987 crore as of September last year, when the size of the total loan book was Tk 21,196 crore. Its net profit in the first nine months of last year was Tk189 crore, 20 percent higher from the same period previous year.
