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‘SPENDING ON TECHNOLOGY IS NOT AN EXPENSE FOR A BANK; IT’S AN INVESTMENT’


Muklesur Rahman is the MD and CEO of Shimanto Bank. He has over 32 years of experience in the banking sector. Prior to joining Shimanto Bank, he was the founder managing director of NRB Bank. He completed his post-graduation from Dhaka University.

He has also worked with Eastern Bank, United Commercial Bank, Standard Chartered bank, Citi NA and Grindlays Bank.


Muklesur Rahman is not a run-of-the-mill type banker. The very fact that he took up the challenges of being the founding managing directors of two different banks is a testament of his‘far from ordinary ’nature.

A visit to his MD secretariat at Shimanto Bank in Dhanmondi would give you further clues.

He would greet you with a strange mixture of casualness and professionalism and make you feel surprisingly comfortable. He would give you great insights about a whole lot of things and when you ask questions that warrant ‘boring and diplomatic sort of reply’, he wouldn’t give you that! That’s afresh in the world of suits and ties.

Fintech recently went to talk with this banker. Here is the excerpt of the long conversation that Fintech had with him.

FINTECH: What motivated you to become a banker? Did you always want to enter in this profession?

M.Rahman: I can’t say that I wanted to be a banker from my very childhood. My father was a joint secretary of the government and he wanted me to become a chartered accountant. But I had no specific aiming my mind. I however was enthralled by the lifestyle of one of my uncles Mr Ruhul Amin who was banker. He was the first General Manager of the now defunct Bank of Credit and Commerce International (BCCI). His posh life at the courtesy of a large bank like BCCI attracted me a lot and it impregnated the idea of becoming a banker like him in my mind.

FINTECH: How did you start your banking career?

M.Rahman: I studied Management in Dhaka University (DU). After completing my undergraduate degree,I got the chance to pursue my MBA at Institute of Business Administration(IBA) in the DU. In 1982 I saw a newspaper advertisement of a job opening in BCCI Hong Kong. BCCI bank was a very big bank at that time.It was incorporated in Luxemburg and it was one of the top growing global banks. It was founded by Mr Aga Hossain Abedi, a visionary banker from Pakistan. I applied and got called for an interview at the Pan Pacific Sonargaon Hotel. I gave the interview but I didn’t get that job.

I had a wish to work in a multinational bank, so after the BCCI application, while still studying in the IBA, I applied for a job in the ANZ Grindlays Bank-another big multinational bank operating in Bangladesh at that time. Even though I did very well in the written exam, I didn’t get that job too. Failures in getting jobs in those two banks had created some sort of motivation in my mind. I set a challenge for myself that I would become such a banker that one day those banks will call me and will ask me to join there.

I then applied for the position of Probationary Officer in the City Bank after completing my MBA from the IBA. Mr Aziz Ahmed was the Managing Director of the bank at that time. During the interview session, he was impressed with my general knowledge and offered me the job. I started my career there in 1983.

FINTECH: Can you shed some light on your long banking career since its beginning?

M.Rahman: I didn’t stay in the City Bank for long. Within a year I moved to the United Commercial Bank(UCB). I stayed there for the next 12 years. It was there where I built my career, knowledge and managerial skills. In the middle of 1995, while I was the branch manager of Tongi branch, I applied in the Standard Chartered Bank.  

Standard Chartered worked as a trading bank in Bangladesh at that time. But globally there was a paradigm shift in Standard Chartered ’s operational focus and methodology. It wanted to explore the potential of banking sector in MESA region more-Middle East and South-Asia market and as a part of that plan they planned to explore the retail banking opportunity here. Retail banking was termed as personal banking at that time.

Standard Chartered hired Mr SAA Mashroor (now the Country head of Bank Al Falah), Mr Mamun Rashid (now the Managing Partner of PWC Bangladesh) and Mr Ali Reza Iftekhar(now the Managing Director of Eastern Bank Ltd). The three of them helped restructuring the bank and launching retail banking services there. I applied in the Standard Chartered Bank for the position of Personal Banking Manager as I had gathered a huge experience in the personal banking sector in my stint at the UCBL. I got the job and joined Standard Chartered as the Personal Banking manager.

Interestingly, when I was working in the Standard Chartered, I got an offer to join the ANZ Grindlays Bank. It was a kind of a triumph for me because as I said earlier that ANZ Grindalys once didn’t give me a job. Initially declined to join there because I was working as the Head of three portfolios- Braches, Priority Banking and Secured Loan there.However after a set of prolonged negotiations, I joined the ANZ Grindlays Bank as its Cluster Head in1999.

In 2000, the ANZ Grindalys bank was acquired by the Standard Chartered Bank. I didn’t find it comfortable there so I left the bank in 2001 and joined Eastern Bank Limited (EBL)for a brief period of three months.After that I joined the Citi Bank N Aand worked there for one year.Interestingly, while I was working in the Citi Bank, I again got an offer to join the Standard Chartered Bank. I took it and joined there again in 2002.In 2006, I was posted in Standard Chartered Nepal as the Head of Consumer Banking.

I stayed in Kathmundu for one year but because of my family reason, I came back to Bangladesh, quitted Standard Chartered and joined EBL as a Senior Executive Vice President(SEVP). Within six months, I was made the Deputy Managing Director(DMD) of the bank. I worked therefor the next six years. Then I joinedthe NRB Bank in 2012 as its founding Managing Director (MD). During my three years in that bank, I had been able to make it a profitable one. It was ranked as the best performing bank among the ninth fourth generation banks.

Finally, In August, 2016, I joined the newly launched Shimanto Bank as its MD.

FINTECH: People have a perception that Shimanto Bank is only for the members of Border Guard Bangladesh (BGB). Is it?

M.Rahman: Yes, this is quite normal to think that Shimanto Bank only serves the banking needs of Border Guard of Bangladesh (BGB). When Trust Bank started its operation,people thought it was a bank for the armed forces. But that’s wrong. Like the Trust Bank, we are also a scheduled commercial bank and also like the Trust Bank, Shimanto bank doesn’t have any individual ownership. It is owned by the BGB welfare trust. It serves the need of the BGB but at the same time it serves the need of a common citizen who wants banking service from it.

We are moving ahead with slow but steady pace. Shimanto Bank has already opened four branches-its principle branches in Dhanmondi, one in Agrabad in Chittagong, one in Satkania of Chittagong and the last one in Mymensingh. We plan to open another six branches by the end of this year-in Motijheel, Benapole, Hili, Kansat, Technaf, and Coxe’s Bazaar.The number of depositors has crossed over 3,500 mark and they have deposited over Tk 85 crore.

FINTECH: How Shimanto Bank is different from other banks then?

M.Rahman: Shimanto Bank is obviously a bit different from other banks. The main difference is that it doesn’t want to make profit only rather it wants to engage itself in some social development works. It also plans to spread out in rural area sand wants to serve the banking need of the unbanked population. This is because the BGB looks after the borders of Bangladesh and their border posts are located in remote rural areas.

The main problem with most of the commercial banks of our country is that those are highly concentrated in urban areas. Even though the central bank has made it mandatory to open a rural branch if a new urban branch is opened, the banks are not practicing that. But this shouldn’t be the case. I believe technology makes it easier to spread out the banking service across the country and we want to capitalize on technology.

FINTECH: How important it is now for the banks to invest in technology?

M.Rahman: Technology has made it possible to get banking services from you mobile phones now, so I can say that technology has literally brought the banks in your pockets. It is extremely important for the banks to invest in technology. There is a tendency among the board members of the banks to term spending on technology as ‘expense’ for the bank.I would say this is not ‘expense’ rather it is investment.  

FINTECH: Does the usage of core banking software (CBS) gives an edge to the banks against those who are still using branch banking software?

M.Rahman:Banks are created to look after all the financial needs of people and businesses. Everything from taking deposits to giving loans is the banks domain, and they are organized to do just that. As a result,most banks create operations based around products: money transmissions, mortgages, cards,loans, insurances, etc. And the most popular way of delivering those services is through the bank’s branch. 

Now, with the advent of technology,the banks started using software in their different branches to better serve its customers. Branch banking software obviously revolutionizes the whole banking industry and make the bankers get rid of those hand written large ledger books. In Bangladesh, all the banks now use software to conduct day-to-day banking operations.

But the thing is- most of the local state owned and commercial banks are still confined themselves in using branch banking software. All the modern banks across the world have shifted themselves to core banking software (CBS). Now the CBS is the every heart of a bank. There is nothing more central than this. The core banking system contains all the ledgers and accounts for all the money that has been loaned out or is under processing, etc. It’s the bank’s proprietary book of account in digital format.

It’s better and faster because now the branches need not to close the day’s transaction and operations literally at the end of the day. Everything can bed one online in real time. It also reduces the bank’s cost of operation in the long run.

FINTECH: Are you using CBS in the Shimanto Bank?

M.Rahman: Yes, we have purchased the CBS from Flora bank in Bangladesh. 

FINTECH: Why did you opt for local CBS over the more recognized global ones Temenos or Ultimus?

M.Rahman: As a managing director of a bank, I thought, if I don’t set the trend of buying Bangladesh made software and encourage the increasing number of country’s IT professionals to build more large scale software like this, then other people in my position swill not come forward. Our local software companies are doing well and this is high time to encourage them by purchasing the products they develop. 

Besides, the cost of local software is significantly lower than the foreign software. Also the after sales services of the local software developers are excellent. You can’t get it from foreign vendors.

FINTECH: Do you have any specific focuses on SME banking?

M.Rahman: The future of this country lies in SME. A total of 4.5 lakh young graduates are entering into the job market each year. There are jobs for only 2 lakh of these graduates. The rest remain jobless. So we have to bring out entrepreneurship from these young people. The banks need to start giving them unsecured small loans so that they can start small business. There has to be a culture of nurturing these small SME, because these entrepreneurs will contribute for the country’s GDP growth.  

In Shimanto bank, we have specific focus on SME. We will launch our SME products very soon. We want to work in the rural parts of Bangladesh because as said most border areas are located in rural parts. In those areas,there is no option but to go for SME.By providing SME loans, we Justino want to entrepreneurship; rather we want to bring social changes as well.Suppose, we have long been hearing about the cow smugglers at the borders; now, from the Shimanto bank, we want to change the lifestyles of those cow smugglers. We want to bring them in legal professions instead of illegal ones like cow smuggling. We want create entrepreneurs out of them by first,transforming them and then by giving them loans from our bank to launch the business.

There is another benefit of focusing on SME banking too. In my long banking career, I have seen that the NPL of SME is lower than the large loans.

FINTECH: What the commercial banks of the country can do to reduce the non-performing loan (NPL)?

M.Rahman: The credit portfolio the whole banking sector of Bangladeshis over 7 lakh crore. Out of this Tk1.10 lakh crore is NPL. Out of this Tk1.10 lakh crore, about Tk 40 thousand crore are being write off from the balance sheet. It means there are still Tk 78 thousand crore worth of NPL in the sector and out of this amount Tk 44 thousand crore worth of NPL is of the six state owned banks. 

Some might say that there are problems within the board and the management. Yes, there are. But there are lacks of skilled manpower in the banking sector who actually understands the importance of risk management in banking. If there were skilled manpower who would have understood the risk management properly, we wouldn’t have this much non-performing loan (NPL) in our banking sectors.

You have to understand that one of the most important things for the commercial Banks is to manage risks properly. The risk management practices and norms have become more complex over the years. There have been several

updates made in the series of international standards

established to regulate risks in banking industry. The landmark publications of the accords on capital adequacy are commonly known as Basel I, Basel II and Basel III. The Committee of Banking Regulation sand Supervisory Practices headquartered at the Bank for International Settlements in Basel,Switzerland established these standards which now deal with a number of risks.

Basel I was issued in 1988 and it focuses on the capital adequacy of financial institutions. Basel-II is based on three main pillars: minimal capital requirements, regulatory supervision and market discipline.However one of the key shortcomings of

the first two Basel Accords is they approached the solvency of each institution independently. The recent global economic crisis highlighted the additional ‘systemic’ risk that the failure of one large institution could cause the failure of one or more of its counter parties, which could trigger a chain reaction.Basel III addresses this issue in two ways. First, by significantly increasing capital buffers for risks related to the interconnections of the major dealers and secondly, by incentivizing institutions to reduce counter party risk through clearing and hedging.

FINTECH: Thank you for giving us time.

M.Rahman: It was my pleasure.■

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