Chosen to serve the organization at a critical juncture Tamal Parvez became the chairman of NRB Commercial Bank last year. At the bank’s corporate head office in Motijheel, where Mr Parvez met with Fintech for this interview, he seemed more intricately involved in the day-to-day activities of the bank than a regular chairman. An unknown observer might be forgiven for thinking he was the MD. A prominent expat entrepreneur in Russia, Parvez is a unique ‘bank-chairman’ who, he says, does not have any business interests in the country.
NRB Commercial is one of the few NRB banks that came into existence in the last decade. It saw a management change last year when Tamal Parvez became its chairman. Fintech asked him about those changes and the changes he is going to make make, along with a host of other topics related to the banking and finance industry.
FINTECH: Tell us a little bit about your background.
I come from a regular middle class family. Both of my parents were teachers in Barisal, where I grew up. After finishing college I went to Russia for study on a scholarship. I was in Russia during a turbulent period, when it was going through a transition. Students had a lot of opportunities then in Russia and the institutions would incentivize students who would work toward the transition the country was making. That’s when I studied information technology, even though primarily I wanted to become an electrical or energy engineer.
In the fourth year at university I saw all fourth year Russian students working alongside their studies. So, I started working as well. That’s basically when my career started. I started working in a IT company and after a year me and four other people started our own business.
FINTECH: Were you ever involved in any business in Bangladesh?
No. I came back for a while and had some capital in my hand. But I joined a job in Ghorashal. I started to inquire about the IT sector in the country. I spoke with senior people in BUET. But there were differences in how they saw things and how I understood them. This was around 1998.
The difference is more about the IT culture than material differences. In Russia the IT community interacted meaningfully and shared knowledge. So, everyone grew. Here I saw that people try to be secretive and do not share knowledge. There was no society of IT entrepreneurs in any meaningful way. Whereas in Russia, people from other companies would solve problems for the community even though they don’t actually know who they are benefitting.
There was also lack of knowledge in Bangladesh. The IT industry functions based on collaboration and knowledge sharing. How can you build an IT community without knowledge sharing?
These were the reasons why I went back to Russia. I started my own company with 7 people. That company operated until 2009. It was called STM Russia and we ran the company in Russia and Finland. In 2009 I merged with another company. That company had about 235 people and our turnover was approximately USD180 million.
FINTECH: Did you have banking experience before joining here?
The company I merged with in 2009 had their own bank in Russia. The company had over 7 thousand employees. So, my banking experience was in Russia, not here. When Prime Minister Sheikh Hasina visited Russia she asked us to come back to Bangladesh and invest. I was so involved then that I couldn’t actually seriously consider coming back. But we were also told that there will be banks for expats, where specific and unique policies will be implemented.
FINTECH: What was your impression after joining NRBC, in terms of how you feel about your work and the bank?
Even though this was meant to be a bank for expats, we didn’t think this would turn into a regular scheduled bank. Naturally, it then faced the problems that scheduled banks do. But what mainly inspired me to join was that I realized that I could create jobs. I could also do things that people aren’t doing yet. Within the last 7/8 months since I joined we could increase jobs by 20 percent in the bank. I believe we will have three times increase in employment within the next one and half year. When I joined the bank had 1,300 employees. It has now crossed 1,700. By the next year the number will cross 3,000.
FINTECH: There was a big overhaul in the management last year. It was a crisis moment. What strategic steps you have been taking to overcome that?
My priority is to try to understand what is going on and what we should do. When I joined the crisis was that this bank had a conflicting position with Bangladesh Bank. There were issues relating to meeting Bangladesh Bank’s requirements. The first thing I did was to take a firm decision to ensure compliance. Bangladesh Bank is the regulatory body, it’s as simple as that. There should be no two ways about that. We might lobby for newer, improved policies, but there has to be compliance at all time.
When I joined the deposit was Tk4,280 crore. Just before I joined the bank lost nearly Tk400 crore. You will be pleased to know that in the last eight months since I joined the deposit increased Tk1,000 crore, making our total deposit Tk5,300 crore.
I have stressed on the bill collection segment. This includes electricity, tax, gas and so on. We also collect the fitness tax for all cars from all over Bangladesh. When people get the sense that they are transacting with the bank for their regular needs that automatically builds up trust.
Many banks don’t want to take this up, as this is not an income generating segment. But everything doesn’t have to be directly profit making. We have the data of all the bill paying customer and that’s important.
FINTECH: Bangladesh Bank regulations are quite strict actually. Even then non-performing-loans or NPLs are on the rise. As of March this year NPLs stood at 10.8 percent. Do you think that is a high percentage?
NPL is like a disease in this country. It really is a mental disease. When a bad practice becomes a habit you have to treat it like an ailment. People are using loans as a mean for income. If you can’t get away with it why you won’t use or abuse it? I have always seen this as an immensely positive thing that 90 percent of the loans are paid back. NPL is high in two sectors actually if you look at it. NPL isn’t high in home loans for example. Our NPLs are with the big corporate customers. And the second sector where NPLs are high is in cards. We don’t have any internal credit score system. In Europe nearly 20 million people don’t have credit cards. They failed CIB once and they can’t earn credit card ever again. We can reach a solution when we will have internal credit analysis, share database among banks, look into payment habits, etc. In Russia if you don’t pay government bills then you can’t cross the border. We have to go into similar direction.
FINTECH: What is your approach toward reaching the unbanked?
We have a big population of 17 crore. It’s a huge market. The huge population can create a huge economy. Our approach for that is going rural. By reaching rural you can grow as much as 25 percent. There are tremendous opportunities there.
FINTECH: What are you thinking regarding mobile financial services or MFS?
MFSs like bKash, Rocket, etc made banking easier in a way. But we should also look at it from another aspect. You are paying two percent to bKash. That is a big percentage for digital transaction, considering the cost is zero for digital transaction. There is also the matter of security. You have very high risk of identity related crimes. I think cashless society is the best society. But cashless does not mean trackless. Overall, I can’t appreciate overcharging the ordinary and marginal people by these MFSs.
FINTECH: Cryptocurrency is a big thing now. Do you see this getting mainstream acceptance in the financial sector?
My company is the third biggest manufacturer of cryptocurrency in Russia. We are making devices for cryptocurrency. The future of this depends on if the current establishment, those who run the current monetary system, allows it to become mainstream. Regulatory bodies will always want to have tight control over currencies.
FINTECH: The NRB banks started with a particular vision of serving and utilizing the expat communities. How successful they have been to that end?
The NRB banks were created from a that idea. But when we became regular scheduled banks we lost that identity. I would say that we haven’t been able to live up to the expectations of the expats. But the positive side is that I realized that there are opportunities here. NRBs can create a lot of products staying within the normal regulatory framework.
But we have to be able to work together with Bangladesh Bank. NRBs are treated like second category citizens. Someone living in the country can take up to 70 percent for home loans, whereas NRBs are allowed a maximum of 50 percent. NRBs are a pillar in our economy. They are not appreciated for what they are giving to this country.
If we can build up a double-taxation system with other countries then an American expat can easily deposit his salary in a Bangladeshi account. There is a law in Russia since last year that if a citizen goes abroad for work then his salary for the first month must come to Russia. So, our transaction laws are the main obstacle here.
If Bangladesh Bank allows us to create products in foreign currencies then we will be in a very good shape in terms of making dynamic products. We are actually in talks with Bangladesh Bank about this. This policy also opens up the door for big remittance potentially.
In Jordan and India revolutionary changes are taking place because of very progressive policies by the central banks. They are bringing in all of the expat money into their countries.
FINTECH: Do you have any unique products at this moment?
We have a lot of NRB products. There is NRT products, long term products and so on. We are actually about to start a campaign for our NRB product from September.
FINTECH: You talked about data a little bit before. Do you use your data to create customized and targeted products?
It’s difficult to work with data in Bangladesh. Bangladesh Bank doesn’t have concrete policies about cloud. If cloud is insecure then banks are also insecure. So, there is no risk in cloud if it’s secure, just like it’s safe to keep your money with banks are secure. There are problems in our Internet sector. If you want to keep your main database on the Internet it becomes too costly. The government has some good projects in this area and I think those will solve these problems.
FINTECH: You mentioned workforce growth within this bank. Could you elaborate on that?
We are going into basic services, like BRT booths, bill collection booths, etc. We have booths in different place in Dhaka city and we also have booths in different districts. We have a plan to set up 493 booths across the country by September 2019. Customers can pay many different types of bills from these.
We are looking towards having more physical presence. Ultimately, the target is to move toward a portal based service. No one will think of it as a ‘bank’, but rather a point through which they can get all the services they need, such as day-to-day things like calling a taxi to shopping. China achieved this already through Wechat. We want to play a part in moving Bangladesh toward that.