Bangladesh’s banking sector is passing a very critical period. Most of the banks are suffering from different crises including high NPLs and shortfalls of provisions which create challenges to maintain adequate capital as well as real income. Though some banks have managed to secure huge amounts of operating profit in the last financial year, the overall indictors are not very encouraging, portraying a gloomy situation of the banking sector. 

Some banks are suffering from acute liquidity crisis, which is the result of rampant irregularities and scams in the banking sector. Now, those banks are losing the trust of their customers as the liquidity crisis is lingering, which is exacerbating the crisis. To turn the corner, it is important for these banks to regain trust of the customers.

Reform should start with a thorough analysis of the entity with a view to identifying the problems. The crisis-ridden banks should make a SWOT (Strength, weakness, opportunities and threat) analysis. On the basis of the analysis, they should create a roadmap stipulating possible solutions to get rid of the problems. SWOT analysis is important because though those banks are suffering from problems, they might have some strengths in terms of its operational capacity. They must focus on those services or capacities and try to continue that service uninterrupted.

For example, some banks may have good network of foreign remittance service or good customer base involved in import-export business. They should focus on those services to generate revenue from those sources, because revenue generation is important to ensure survival. At the same time, banks have to be strategic to control the expense. 

Bank should go for ‘lean and mean’ method for controlling overall expense. Bank can best utilise their premises and save money every month by releasing unused part of the premises. Bank may close their non-profit branches and amalgamate the portfolio with the nearest branch as a part of the cost control process.

Meanwhile, measures should be in place to motivate the employees working in the bank. During any crisis, it is important to motivate the employees. Contribution of every single employee should count and reward should be given according to their performance.

Again, if the main and primary weakness of a bank is its liquidity crisis, that bank should concentrate on the liquidity problem only, keeping other secondary problems aside. But the problem is that customers do not trust those banks to further deposit their money. So, those banks should find out alternative sources of liquidity on the basis of easy of availability. 

For example, banks can sale payment order issued favouring different organisations (both government and non-government), and collect utility bills. The crisis-ridden banks are getting liquidity support from the central banks. Banks should utilise the fund properly.

Inward foreign remittance should be given priority so that the receivers get money without any hassle. It will help to utilise the foreign currency for import payment. Retail customers should also keep patience while withdrawing their money. Banks may introduce competitive interest rates for the existing depositors if they defer the encashment, in that case profit should be given in cash (if they avail the facility). It may help the banks to get some breathing time for recovering themselves and then deal with the pressure.   

At the same time, employees should confront their existing retail and SME customers, and try to convince them by briefing them about the overall situation. Banks should encourage the customers to deposit money. Banks should also focus on recovering loans. Banks can build high-capacity recovery team comprising senior management to recover the money. Banks could also introduce personal reward programme (promotion, incentives, bonus, cash reward etc.) for the employees working in the recovery team.

Most importantly, regaining the trust of the customers is paramount. Bank should communicate their strengths and reform initiatives to the customers. In this connection, regular meetings with the customers should take place in different branches in the presence of senior management. Higher management should address the problems to the customers and at the same time, talk about possible solutions. Only a clear roadmap could help restore confidence among the customers. Central bank might also play a great role and help the struggling banks in their endeavour to bring back trust of the people.

It is true that out of around 61 banks, only a few banks are suffering from liquidity crunch. But the bigger problem is that the whole banking sector is suffering from a trust issue. Unless the whole sector unites and work together to address this issue, the problems prevailing in this sector will never go away.
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The writer is a banker. He can be reached at [email protected]