Containing inflation a must to boost pvt investment: MTBL MD

Containing inflation is a must to increase private sector investment as businesses are cutting down their production due to a slowdown in consumption amid the declining purchasing power of consumers, said Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited (MTBL). 

He asserted that rising lending rates are not a deterrent to investment, but inflation is. When lending rates were high, exceeding 14%, private sector investment was not adversely affected. Conversely, when lending rates were capped at 9%, investment did not increase. 

He made the observations in an interview with The Business Standard marking MTBL's 24th anniversary, which will be celebrated on Monday.

Rahman addressed various challenges facing the banking sector, including high levels of non-performing loans, weak legal infrastructure, a lack of governance, and liquidity pressures in both local and foreign currencies.

The recent hike in the policy rate has led to an increase in lending rates. How will it affect private-sector investment? 

High inflation is a major concern. Private sector investors will not invest until price pressures ease. This is because high inflation reduces consumers' purchasing power, making it difficult for businesses to sell their products. As a result, a slowdown in economic activity is likely.

Globally, central banks are hiking interest rates in an effort to contain inflation. Once inflation cools down, lending rates can be reduced.

It is important to note that high levels of private-sector investment were recorded when interest rates were above 14%. However, when lending rates were forcefully capped at 9%, investment did not increase.

In addition to the cost of doing business, investors also consider factors such as land availability, electricity supply, fuel availability, and uninterrupted gas supply. If these logistical support factors are not addressed, investors will be hesitant to invest, even if lending rates are low.

Therefore, it is clear that infrastructure support is more important than the cost of doing business in stimulating private sector investment.

In order to minimise the challenges facing the banking sector, inflation must be brought down to a tolerable level.

Another challenge facing the banking sector is the gap between the dollar rate in the hundi market and the official channel. 

What kind of challenges might our banking sector face in the near future, considering both global and domestic factors?"

We have been performing well in the export sector despite various challenges. Unlike many countries, we have experienced consistent growth in garment exports. However, I believe there was an opportunity to perform even better that we couldn't fully seize. One significant challenge we are facing is the decreasing export margin.

The distressed assets in our country's banking sector total approximately Tk3.5 lakh crore, and a substantial portion of this may turn into non-performing loans (NPLs). This is the most significant challenge we face. I believe that the most problematic aspect of our banking sector is corporate governance. Political influence plays a significant role in the decision-making process behind bad loans. It's possible that even at the director's level, we have made numerous erroneous decisions. As NPLs continue to rise, there's a growing need for accountability and potential punitive measures, for example.

To resolve this situation, we must tackle the issue of willful defaulters head-on. There have been recent amendments to the Banking Companies Act, and their effectiveness will become clear over time. Additionally, our legal infrastructure is currently weak, and this area demands greater attention. It's crucial that we also have strong political will to drive necessary actions that can serve as an example for others.

Over the past two years, our economy has faced numerous challenges, and the banking sector is no exception. How has Mutual Trust Bank been faring in this situation?

In short, Mutual Trust Bank has been performing admirably in recent years. We've been dedicated to delivering the best services in terms of both numbers and customer reach. Our focus has been on enhancing service quality and introducing customer-friendly products. Moreover, we are actively working to boost customer confidence and satisfaction by providing services directly to our customer's doorsteps.

We have made a conscious effort to uphold good governance within the bank, and our board has played a pivotal role in this achievement, of which we can be proud.

With a dedicated team of 2,700 colleagues, we are constantly striving to improve the bank.

Our bank's profit stood at approximately Tk700 crore last year, a significant increase from Tk500 crore six and a half years ago. This year, we are hopeful of surpassing Tk800 crore.

We have encountered some NPLs due to a few poor decisions made between 2014 and 2016. We are actively pursuing aggressive strategies to recover these accounts. The impact of the COVID-19 pandemic and subsequent external challenges has slowed down the cleanup process. Nevertheless, our NPL rate is currently below the industry average at 6%, and we are determined to reduce it further to 3% in the near future. Additionally, we have developed a roadmap with the aim of clearing the entire book by 2027.

How does Mutual Trust Bank differentiate itself from other banks in terms of its product offerings?

First and foremost, when a customer visits our bank, they have the option to access Sharia-based products in addition to our traditional banking offerings. We have observed that our Sharia banking services have been quite profitable and enjoy significant demand in Bangladesh.

In addition, we are placing a strong emphasis on digital banking. When I initially joined the bank, I noticed that we were lagging behind in areas such as SME and retail banking. This prompted me to initiate efforts to enhance our digital banking presence. As a result, we have become pioneers in the digital banking sector, with our bank being among the first names that come to mind when discussing the top performers.

Recently, we introduced micro-merchant finance for the first time. Through our partnership with Delivery Tigers, merchants can now secure instant loans using the delivery app, with loan approval taking as little as 5-7 minutes. Additionally, we have launched digital nan loans.

We are the pioneers of virtual debit and prepaid cards in Bangladesh. Our app, which boasts around 1.20 lakh users, is highly regarded. It caters to almost all of your daily banking requirements, including the ability to open a new account without the need to visit a physical branch. Our goal is to transform it into a super app where you can perform a wide range of banking tasks all within a single application.

In addition, we have concentrated on developing our digital products, such as apps, in-house, giving us complete control over these digital offerings. I've had discussions with the CEOs of numerous banks worldwide, and many of them also opt to create their own digital products.

We have done a lot of work on the digital banking front and are continuously working here.

What are MTBL's aspirations for its future?

We aim to become a significant player in the banking sector of our country. While it may not necessarily mean being the top-profit earner, we aspire to excel in overall governance, operational efficiency, and the income generated from our products. Our goal is to be the foremost service provider in the market so that when people need financial solutions or products, our bank is the first name that comes to their minds. We are actively working towards achieving this by ensuring customer satisfaction across all our services.

We are committed to both actively promoting our existing product offerings and, at the same time, deeply understanding our customers' needs to tailor our approach accordingly. Our goal is to make significant strides in the digital realm, transforming MTB into a digital-first bank.

Last year, we provided a loan of Tk6 crore to 479 maize farmers in remote areas of Lalmonirhat. Now, we are in the process of expanding our support to approximately 1,000 farmers. Additionally, we are exploring digital means to facilitate the disbursement of these loans, leveraging digital devices and technology. It's worth noting that we were the pioneers in introducing the first Bangla QR code in Bangladesh.