'Meghna aims to be among top 15 banks'

New-generation Meghna Bank aims to rank among the country's top 15 lenders by expanding its footprint in the SME sector, Managing Director Syed Mizanur Rahman has said.

In a recent interview with The Business Standard's ASM Saad, he added that the bank plans to invest heavily in digital banking to reach customers in remote areas.

At a time when the banking sector is facing a severe crisis with default loans at 36%, Meghna Bank has kept its non-performing loans in single digits, which he believes will help build depositor confidence.

Infograph: TBS

What kind of banking does Meghna Bank focus on?

Meghna Bank is focusing on small lending, particularly in the SME segment. The aim is to channel funds to areas where there is strong demand for small loans, so that small businesses can access financing more easily. There is currently significant demand for this type of small-scale financing, and the bank is working to understand the specific credit needs at the grassroots level. 

Meghna Bank believes this approach will play a leading role in bringing positive change to the rural economy. At present, around 80% of the bank's portfolio is in corporate banking, but it is gradually expanding its exposure to retail, SME and digital banking in line with market demand.

Why is Meghna Bank focusing on retail banking?

Most banks in the country are heavily focused on corporate lending. There is a belief that larger loans generate higher profits. However, large lending also creates significant concentration risk. Non-performing loans have risen sharply, making corporate banking particularly vulnerable. By concentrating too heavily on corporate lending, many banks have significantly increased their risk exposure. If banks had maintained a more balanced focus on SME, retail and corporate banking from the outset, the sector's current challenges might have been less severe.

For this reason, Meghna Bank believes diversification is essential for long-term sustainability. Rather than being confined to a single segment, banks need a more diversified business model. Taking customer demand into account, Meghna Bank is therefore placing greater emphasis on retail banking and aims to deepen diversification in this segment after carefully assessing risk and business dynamics.

Why can depositors have confidence in Meghna Bank?

The country's top banks have a long history. Many first-generation banks are over 40 years old. Meghna Bank, by contrast, is about to celebrate 13 years of operations this year. When large and established companies choose a bank for deposits, they consider its overall financial health, as deposits are the lifeblood of a bank. 

Meghna Bank's financial position is strong, with non-performing loans below 6%, giving it a solid foundation. As a result, several corporate clients are placing deposits with Meghna after assessing its financial strength. We expect individual customers will also be encouraged by the bank's robust position, as key indicators such as the ADR ratio, capital adequacy, and non-performing loans compare favourably within the sector.

What are the future plans for digital banking?

Since the future of banking is increasingly digital-focused, Meghna Bank is ramping up investments in this area. The plan is to integrate four platforms – web-based banking, corporate banking, retail banking, and mobile financial services (Meghna Pay) – into a single seamless system. This will allow customers to conduct transactions digitally without visiting a branch.

Once fully developed, digital banking will even enable customers to access loans remotely, a facility already available in many countries. We believe that Meghna can enter the list of the country's top 15 banks in the future, not merely in terms of profit but from a balance sheet strength perspective.

What challenges are fourth-generation banks facing?

Banks should not rely on political considerations; they must focus on their operations. Meghna Bank is actively building relationships with foreign correspondents and working to secure specific credit lines, which can be accessed once targets are achieved.

Political instability, however, can reduce the availability of credit lines. A fair and credible election is therefore essential, as it would show internationally that the country's situation is improving. After such an election, the overall environment is expected to stabilise, resolving issues related to credit line access.

Why is private sector investment low?

Currently, banks are struggling to find reliable, creditworthy borrowers. Political uncertainty has made entrepreneurs reluctant to invest in new businesses. As a result, private-sector lending demand is weak. This lack of new investment has contributed to rising unemployment. It is expected that after a credible election, private investment will pick up, which in turn will increase demand for loans.

At present, a significant portion of many banks' profits comes from treasury bills and bonds, reflecting the low appetite for private sector lending. Once investment activity resumes after the elections, demand for credit is likely to rise, enabling banks to expand lending again.

What impact does rescheduling loans have on the market in terms of reducing non-performing loans?

Many of the country's large borrowers have taken loans from banks but failed to repay them, with some diverting funds abroad instead of using them for the intended business purpose. For such companies, granting a two-year grace period or a ten-year rescheduling makes little difference.

However, there are businesses that genuinely face losses due to currency fluctuations and other economic factors. These enterprises truly need support, and targeted rescheduling can help them recover.