After successful completion of 17 years journey in Prime Bank, lastly as Additional Managing Director, M. Reazul Karim joined Premier Bank Limited in 2013. Besides managing the regular Corporate Banking Portfolio, he was given the responsibility of by the Board to look after financial markets, treasury, risk management and audit affairs as he attained the qualification as FCMA. (1995-2012). In December 2017, he was honored to be chosen by our Board of Director to lead the Bank into the future.
This new role with all its responsibilities come as an exciting professional challenge – on that he has embraced whole-heartedly. He joined the premier Bank limited because it is an extraordinary organization with a rich legacy and huge political, serving a diverse range of client across the most dynamic and emerging market in the country. It is a Bank with a soul. He is entirely realistic regarding complexity of challenges that lie ahead not just for the bank but the country’s banking sector as a whole.
An admired personality, Mr. M Reazul Karim has achieved many a laurel for his outstanding role for banking development in the country.
Started his career as a Management Trainee with National Bank in 1984, M. Reazul Karim has seen the continuous rise of his banking genius. Insightful banker and a dynamic leader, M. Reazul Karim, carries with him a deep financial services knowledge including Corporate Sector, Governance as well as regulatory and public policy experience gained from senior positions in a wide range of financial fronts. His extensive knowledge of financial markets, treasury, risk management and his qualification as FCMA is of particular value in The Premier Bank’s Risk and Audit affairs.
With over 35 years of experience in the realm of Banking Industry and related sectors, he is well placed to carry out his role as the right leader for the Bank refining The Premier Bank’s strategy to focus on growth and resilience.
Currently, he is holding the position of the Managing Director & CEO of the Bank.
Fintech team caught up Mr. Karim at his Banani office to learn more about him and his experience in banking sector. Here is the excerpt.
Fintech: Tell us a little bit about yourself and your career life.
Recounting or reminiscing my background inevitably takes me back to my childhood days that I spent mostly in Dhaka. I started my formal schooling at Panchbibi L. B. Pilot Government High School, Joypurhat, where I received a life-changing education. I passed High School with a satisfactory result and then went on to Carmicale College, Rangpur for my Higher Secondary education. Later, I enrolled myself as a student of Dhaka University and obtained my Bachelor’s Degree in Commerce (Hon’s) and M.Com in Accounting with good grade. In accordance with my subsequent plan, I have successfully achieved the feat to become a Professional Accountant (FCMA) and fellow member of The Institute of Cost and Management Accountants of Bangladesh. I began my banking career as a Management Trainee with National Bank in 1984.At the onset of my career, I learned a lot about leadership, team works, organization, and Management. Around that time, I was forced to come out my introvert disposition and mingled with people of all walks of life because that was the demand of both job and disseminating my banking knowhow among peers and people around me.
F: With your banking experience can you tell us how much retail banking has changed in the past 10 years?
Against the backdrop of prevalent market realities, The Premier Bank Limited is increasingly focusing on retail customers as more and more people are coming under the formal banking channel. Undoubtedly, the retail banking is providing enormous business opportunities to banks which tend to concentrate on the corporate clients. The nature of retail transactions is changing with each passing years and I believe, in the coming decades the change will take more phenomenal shape. In the past, The Premier Bank Limited was not much enthusiastic about Retail Banking. But with the passage of time, our Retail Banking segment gained significant momentum. We are now more focused on Retail products and small ticket business spaces, churning out new products innovative services and customers engagements. Banks should not only lend funds to the corporate frontier, they need to empower the consumer segments either. We need to focus equally on the two areas. The Premier Bank has rolled out as many as 25 new products in the last one decade. We contemplate on launching at least two or three new products every year that goes with the life style of customers. We also have ventured into new service concepts like Priority Banking Centre, Card based corporate solutions, Mobile Apps for banking services and various life style enhancement programs. The Bank has invested a lot on digital space in recent years. The Bank has now around 1900 customers. Our focus is not grow large on customers number, rather we want to keep the number steady – we contemplate on growing their transactions and service level.
Our Retail Banking portfolio has grown by 300 percent over last three years. This year too we are going to witness a rise. Our Home Loan portfolio around 10 percent of total Retail Loan Portfolio keeping NPL at 2.79 percent only. This is one of the lowest as far as the industry matrix is concerned. Now we are focusing extensively on Cards business. Of late, we launched EMV Cards and our cards are expected to register 100 percent profit growth over previous year. We performed extremely well in HAJJ CARDS either. This year in HAJJ Cards, our market standing was Second in terms of issuance and offering pre-paid limit on HAJJ CARDS.
We have couple of departments in Retail Banking Division. These include Retail Branches, Cards Division, Direct Sales, Remittances, Recovery and Call Centre.
F: The common problem in Bangladesh Banking is Non Performing Loan (NPL). Is NPL rising? How does Premier Bank Limited deals with it?
In recent times loan default has emerged as a topic of frequent discourse in both in academic arena and media as well. The issue is of great importance in view of the dominant role of the banking sector in financing investment in the real sector of economy. The capital market has not yet reached a level where it serves a major source of long term finance. In consequence, investment economic growth, employment generation, and poverty alleviation are inextricably connected with the financial soundness of the banking system is currently under tremendous stress given unbridled increase of loan default. By way of introduction it should be mentioned that there are certain structural features of the banking system in any country which make it prone to loan default. First, asymmetry of information is pervasive in banking system. The means that the lenders do not have full bloomed information that the borrowers possess about financial viability of the projects while which approaching for credit facilities. Moral hazard is also a typical characteristic of the banking sector. The banks harbor the notion that they will be bailed out in the event of imminent collapse. This encourages adverse selection in that banks lend money to risky borrowers at higher rates of interest at the cost of potential borrowers with sound and viable project proposals but unwillingly to pay high rate of interest. I think these considerations dictate the need for prudential supervision and sound corporate governance of the banking system of the country.
Despite being diligent and fairly compliant in the events of dealing with our quite large loan portfolio, The Premier Bank is not fully immune to NPL syndrome. Yet comparing to our peer competitors, we have been able to hold on to a somewhat better position by maintaining a NPL rate of 5.50% till the end of November 2018. This has been possible given Senior Management’s prudent and careful approach to CRM undertakings blended with wholehearted support from the competent, hardworking team members.
The Premier Bank has their own guidelines and well stipulated CRM policy framework for risk assessment and administering lending activities in an orderly manner. These guidelines, policies and time to time issues circulars are meticulously adhered combining a sense of prudence and judgment under intimation to the Senior Management and the Board.
Audit and Inspection Division [ICD] conduct their supervisory role in a regular and routinely manner. Risk Classification/Grading systems are too exercised basing on sector specific policy. Potential risks we confront in the entire gamut of lending commensurate with the nature of business. Moreover, we make sure that it is always within the tolerable threshold of risk appetite as set by the Board of director of the bank and prudential rules.
F: What can commercial banks do to reduce NPLs?
If we take a glance at the overall loan scenario of the country, it will paint a grim picture at least at the moment. Bank’s non-performing loans [NPL] hit nearly 1 lakh crore at the end of September 2018 – the largest ever Bangladesh’s 48-year-history. The amount of toxic loans increased 11.23 percent to Taka 99,370 crore at the end of third quarter compared to the previous quarter according to the data fetched out from the Central Bank. The amount is up 24 percent from a year earlier. The NPL now account for 11.45 percent of the banking sector’s total loans, up from 10.41 percent in June this year. In a recently published report unveiled in November 29, 2018, Bangladesh’s Banking System has been put on “Negative Watch” by the global rating agency Moody’s Investors Service, despite country’s impressive economic performance. The downgrading comes in the wake of worsening asset quality caused by underlying weakness in Corporate Governance within Banking Sector which led to NPL ratios to increase to 10.4 percent as of June this year.
Meanwhile Moody’s pointed out, the worsening asset quality will lead to credit cost rising. Meaning that average person will now have to deal with the double whammy of borrowing at higher cost and tax payers money doled out to troubled banks. Moody’s, albeit, expects that Bangladesh Government to remain supportive of the Banking System given the Government’s track record of taking pre-emptive measures against banking failures. Moody’s further comprehended that the Government has the capacity – as reflected in the country’s modest general and external debt burden – to support the in times of need.
While suggesting the remedial actions to contain the wave of looming delinquent loans and to bring about phenomenal improvement of Bank’s asset quality as reflected in Moody’s assertion, first comes analytical competence of the officers dealing the loan proposals have to be improved. They have to be thoroughly skilled in assessing viability of the project, credit worthiness of the borrower and on the top of everything purpose of the loan for which loans are south. Valuation of the collaterals, monitoring and end use of fund should be taken to cognizance all the time.
Then comes ensuring sound Corporate Governance of the Bank. The functions, role and responsibilities of the Board and Management staff have to be clearly defined and ratified and complied. The Audit Committee and Risk Management Committee should be allowed to function autonomously.
F: You have SME banking. Is it a big profit making segment for your bank?
Small and Medium Enterprises [SME] are considered as the driving force of economic growth throughout the world. SMEs are playing a vital role in employment generation for sustainable industrialization in both developed and developing countries around the world. Virtually, SME has been accelerating the country’s industrialization as well as economic growth leaving behind a contribution of 25 percent to the GDP. In context of Bangladesh, there is no alternative to SME for rapid industrialization and national economic growth through lower capital infusion and employment generation. Taking cognizance to the contribution of SME in bolstering the growth of country’s economy, our SME Banking Division has been staffed with experienced and well-groomed personnel with a view to providing tailor made services to the SME clients. Our SME Banking is offering wide range of products on the basis and needs of SME clients. We are serving our SME clients through our all branches including 12 [twelve] specialized SME/Agriculture outlets.
At the end of 2018, SME loan accounted for 32.93 percent of total loans and Advance portfolio of the Bank, which has been extended among well diversified SME sectors, such as cottage industry, Handicrafts, Paper Carton Manufacturer, Power Loom, Small and Mediumsized Garments, Micro and Small Trading etc. Of late, The Premier Bank limited has launched 3 [three] new demand driven SME products named as “Premier Quick Trade [Trade Finance Product for Emerging Market Segments i.e. newly developed SME industry, Service and Trading concern directly involved in cater to Backward Linkage service, “Premier e-GP Finance and ‘Premier Samridhi.
The Premier Bank Limited is bringing about some ground breaking changes to its business model for Corporate, Retail and SME Banking business in order to diversify its operations by 2019. We are in a road to double our loan disbursement in SME as part of our roadmap for 2019. Percentage default loan stands below 5 percent at the end of November 2018.
F: How big is your Islami Banking portfolio?
The Premier Bank Limited has been providing Islamic Banking services since 2003 with 2 [two] Islamic Banking Branches under its Banking network: one at Mohakhali, Dhaka while another at Laldighirpar, Sylhet. These Branches have been performing fairly well maintaining increasing business growth under the brand name: Premier Tijarah. The Bank is maintaining a separate ‘Accounting Software completely different from Conventional Banking one ensuring the standards adopted by “Accounting and Auditing Organization for Islamic Financial Institutions [AAOIFI]. Our Islamic Branches offer Deposits Products under ‘Al- Wadiah and ‘Mudaraba’ principles. These products are specially designed taking cognizance of market demand adding new features and above all maintaining customers’ satisfaction. Investments operations are exercised in line with Shari’ah under Islamic Investment modes such as: ‘Bai Al-Muazzal, ‘Bai Al-Murabaha, ‘Bai As-Salam’, ‘Hire Purchase under ShirkatulMelk’, ‘Quard’ etc. New products such as Personal [Consumer] Finance, Swapno [Deposit Scheme], Registered Retirement Deposit Plan [RRDP] has been launched. Besides these, Islamic Banking Online Services are also made available at all Branches of the Bank from where Islamic Banking Customers can open Deposit Accounts and can approach for investment including availing all kinds of services.
Our Islamic Banking Investment exposure at the end of November demonstrates a figure of Taka 91100.00 Lac which is 6% of the Total Loan portfolio of the bank with an increasing trend of 35% comparing to the year passed by. NPL percentage standing nearly 1% at the moment.
F: Has the Islami Banking market faced a shifting of balance since the IBBL had the overhaul? How did it impact the banking sector?
Islami Bank Bangladesh Limited (IBBL), the country’s largest private sector bank, has gone through some trial and tribulations in just one and half years of the change in ownership reportedly due to mismanagement and internal conflicts. Bankers, depositors, investors and economists were worried as they apprehended the crisis in the country’s largest private bank would affect the whole economy. At the onset of the changeover, the Bank faced a bit of setback. As far as media coverage and market dynamics reads, Islami Bank Bangladesh Ltd. appears to be in a stronger and more stable position than before.Under new Management and renewed spirit, IBBL, one of the renowned Shariah-based banks in the world has every possibility to revamp its image and win back the trust of depositors and stakeholders.
F: The world is rapidly moving toward cashless systems. Where is Bangladesh in this regard and when the country can be cashless?
Digitalization has become an integral part of our lives, and this means that transactions too are increasingly moving towards digitalization with each passing day. People from all walks of life become busier and they always on the move. Waiting in queue for more than minutes in a shopping mall, in an upscale eateries or along Bank’s Cash counter is no longer an option for many.
In Bangladesh bKash, Upay and ipay already made inroads into the cashless transaction domain by adopting QR code. Customers can make the payment more easily by merchant QR code scan on the stated APPS. QR code is also gradually being integrated with the Banking System in Bangladesh. We are quite fast catching up with the world and making rapid progress to cashless transaction these days. Introduction of new payment technology like QR Code system is making our payment experience faster, easier and inclusive.
F: Have you implemented automated services? What are those?
While our strategic actions are improving our network, we are also anticipating and adapting to the social, economic and technological trends that are changing our operating environment and our customers’ needs and expectations. The adoption of rapidly evolving digital technologies by our customers is arguably the most transformative force for the financial services industry. Through our country-wide network, we are able to identify and respond to digital trends countrywide, applying the technologies that provide the greatest benefit to our customers. In order to make banking faster, easier, safer and digitized, we have launched ‘FAST TRACK” in Jamuna Future Park, Dhaka by now. This very modern- come- digitized outlet will facilitate our customer to get Account Opening, ATM and Cash Deposit services. We are also contemplating on introducing biometrics, voice recognition and fingerprint technology across our network by 2019.
F: What’s ahead for Premier Bank? Where you want to see it in the next 5-year time?
Over last 5 years a great deal has changed at The Premier Bank Limited and much will change going forward. We are a major full-service player in the Banking domain across the country, have leadership several important segments and moving fast to embrace digital calypso. We also demonstrated our vibrant presence in Corporate, Retail and Cards segments. We are committed to running The Premier Bank as a more sustainable and responsible business, serving today’s customers in a way that also helps future generations, generating long term value for all of our stakeholders and society. Our service levels are improving and we believe we can meet our upcoming years aspirational and colleague targets. Our focus on capital strengths remains a cornerstone of our plan in the next five- year time.
IT giants like Google, Amazon and Apple are likely to play a bigger role in the financial ecosystem around the globe. It’s still unclear where things are heading, and what the impact will be when it comes to financial sectors. Are they going to try to take over Bankers’ role? In this context, too, our added value in terms of financial and sector expertise is what can really give us an edge in addition to the data of vast client base The Premier Bank serve. I hope we will end up complementing each other, as it now the case with Fin Techs. Banking is a highly regulated line of business, and because of that it is doubtful that large IT companies are really keen to jump in themselves. It over the next Five to Ten years we manage to overcome this external challenge, and even grow profitably and become stronger than ever before. The Premier Bank is in good shape right now, so we have every confidence we will succeed.
F: It was nice talking to you. Thank you very much for giving your valuable time to Fintech.
Thank you for your time too and I wish Fintech may go a long way.
Note: Some mistakes of this interview with the information have occurred at Fintech print version. All the information are now clear and okay at this blog. Fintech feels sorry for the unprecedented happenings.