The amount of non-performing loans stood at 18 per cent in December 2020. But it came down to 13.82 per cent in June 2023. Hopefully, we will be able to reduce NPLs to single digit by 2026, Md Afzal Karim, Managing Director of Sonali Bank, tells The Business Post’s ASM Saad in an interview
What is the main problem facing the banking sector?
The main problem facing the banking sector is non-performing loans (NPLs). But the fact is that it's very tough for a bank to control NPLs. When I was appointed as Managing Director of Sonali Bank, I stressed the need for reducing default loans in the bank as it weakens the bank's financial account. Performing loans increased at Sonali Bank. The amount of non-performing loans stood at 18 per cent in December 2020. But it came down to 13.82 per cent in June 2023. Hopefully, we will be able to reduce NPLs to single digit by 2026.
Are Sonali Bank's deposits meeting expectations?
People have trust in Sonali Bank as it is a state-owned bank. They know that if they invest their money in this bank, their money will be saved. So, people are also interested in making investment in Sonali Bank. On the other hand, savers are continuing to deposit their money with Sonali Bank. We don't have a shortage of deposits. Our deposit growth is rising day by day. Now Sonali Bank's outstanding deposit stands at 1.45 lakh crore. The outstanding balance of deposits stood at 1.32 lakh crore in the same period last year.
What's the current loan situation at Sonali Bank?
Outstanding loans stood at Tk 59 thousand crore last year. Now outstanding loans stood at Tk 99 thousand crore. The growth of total loans has increased in one year. So, the advanced deposit ratio (ADR) stood at 61 per cent in 2023, which was 51 per cent last year. If I compare it with the data three years ago, the ADR was below 48 per cent at that time. ADR growth also stands in a good position, which actually indicates that loan growth increased last year.
Did net interest margin increase at your bank?
Loans are assets and deposits are liabilities for a bank. Interest income has increased at Sonali Bank as performing loan has increased. As a result, the net interest margin (NIM) stood at Tk 979 crore negative in December 2021, but the NIM stood at Tk 400 crore positive in June 2023.
Are you successful in reducing capital shortfall?
The capital shortfall was 6,800 thousand crore in December 2023. The amount of the capital shortfall stood at Tk 4,400 thousand crore in December 2022. The reason behind the decreased capital shortfall is the increase in better-performing loans at banks. I think Sonali Bank succeeded in what it required.
Now banks are focusing on digitisation. What type of initiative Sonali Bank has taken?
Sonali Bank launched an e-wallet. Expatriates are getting benefits by using this wallet. Customers can withdraw their money through a QR code without cheque book. In March, Sonali Bank opened a call centre, which is the first among the state-owned banks in the country. The call centre number is 16639. Calling this number, customers can get all the information they need about Sonali Bank. Many people use debit cards. If they lose this card any time, they can immediately inform the call centre. This keeps the customers’ money safe. The government is laying emphasis on the cottage, micro, small, and medium enterprise (CMSME) sector. This sector should get 24 per cent of the total loans from a bank. Sonali Bank is also putting emphasis on CMSME.
Do you think Sonali Bank is facing liquidity crisis?
Sonali Bank is not facing any liquidity crisis currently, rather it has surplus liquidity. A bank faces liquidity crisis when depositors lack confidence and withdraw deposits from the bank. But Sonali Bank's ADR is in a better position, though its limit is within 87 per cent. There is no difference between the demand and supply.
What steps you have taken to reduce defaulted loans?
Sonali Bank's monitoring team is trying their best to recover the non-performing loans. Every branch manager received instructions from its headquarters that before providing loans to anyone, they must check their details. Branch managers are cautious about providing loan.
