Stimulus loans-turned-long term investments put banks in stress: NRBC chairman

Stimulus loans that were given to help businesses recover from pandemic-induced losses turned into long term investments due to the extended repayment facility, putting banks in a crisis.

SM Parvez Tamal, chairman of the new generation of the NRB Commercial Bank, made the observation in an interview with The Business Standard recently, marking its 10-year journey since 2013.

He said banks could not recover the stimulus loans due to the extended repayment facility which created a liquidity crisis. Loans under stimulus packages were given for one year but the repayment facility was extended for two years, leading to a mismatch in assets and liabilities for the banks.

Different business associations are stressing not paying the stimulus loan even after getting an extended repayment facility on the pretext of the present global crisis, putting banks in trouble, he said. 

In 2020, the government had announced loans to the tune of Tk73,000 crore at 4.5% interest in two tranches to maintain the momentum of the country's industrial and service sectors in the aftermath of the impact of Covid-19.

Tamal said banks will have to be very cautious in lending and strengthen monitoring to survive amid the growing world economic crisis.

Addressing the rising default loans, he said there is no specific measure to recover loans from defaulters. In developed countries, there are lots of barriers for defaulters, like a ban on travelling abroad and on acquiring trade licences. But in Bangladesh there are no legal barriers or social pressure for defaulters to be dealt with.

Moreover, the process of confiscating mortgaged property of defaulters is very complicated and lengthy, he added.

However, the new amendment coming into the Bank Company Act may help to create social pressure on willful defaulters, he said.

The cabinet recently approved a draft of the Bank Company (Amendment) Act, introducing the provision of barring willful defaulters from travelling abroad, registering houses, vehicles and companies as well as being on committees of political parties.

The draft act also notes that not more than three people from one family can become directors of a bank.

Referring to his bank, which commenced its journey on 2 April 2013, Tamal said it will focus on employment creation instead of targeting profit in the coming years.

"We will focus on the low level economy segment for lending to create jobs by increasing the number of small borrowers."

The bank has set a target of creating one lakh new employment opportunities through lending money to new borrowers, he said.

The bank disbursed loans among 55,000 new borrowers last year, he said.

He said if one borrower gets a loan to set up a business, then at least two people will get jobs in that business and in this way the bank will create opportunities of employment for one lakh people next year.

The bank also aims to increase its SME (small and medium enterprise) portfolio size to 50% from the existing 35% by targeting borrowers in remote areas.

There is a challenge in SME lending because of the 9% lending rate, but the default loan rate is less than 1% here, which will compensate for the loss experienced by the banks, he said.

The bank is not aggressive in profit making; it rather prefers to serve the country through job creation, he added.

He said his bank also has a contribution in the Rooppur Nuclear Power Plant project as salaries for the Russian employees working there are channelled through the NRBC Bank.  

About NRBC services

The bank has introduced services for people of all classes. In this digital era, the NRBC Bank has launched a digital banking service for the new generation. In the year 2019, it launched its banking app "Planet"'. Soon after that, it introduced "Planet Plus" for corporate users. Now customers can receive any kind of banking service with these apps easily. There are special banking facilities for corporate clients also. At present, 55,000 customers are availing banking services from the NRBC Bank.

Online account opening to online shopping – everything is possible through Planet app. Even a customer can pay government utility bills such as DESCO, DPDC, WASA. A customer can get information regarding the bank's services, including the location of ATM booths, branches and sub-branches through the app.   An average of Tk350-360 crore is being transacted every month through this service.

The NRBC Bank has received international recognition for its success in the introduction and expansion of technology-based services. The NRBC Bank Planet has been recognised as the "Most Innovative Mobile Banking app" by the UK-based magazine The Global Economics.

The bank has also received two awards for the "Best Use of IT and Technology" and the "Best Use of Mobile Technology" at the South Asian Business Excellence Award.