“Three-tier loans will reduce defaults and increase lending to SMEs”

The public bank Rupali has been present in the banking sector for five decades after independence. Through its branches across the country, the organization provided agency services to the government for the collection of public revenue. For banks, payment defaults are the bane. To deal with this, the Managing Director and CEO of Rupali Bank, Md Obayed Ullah Al Masud, has come up with the “Three Tier Loan” model. In an interview with Sakhawat Prince of The Business Standard, the CEO discussed the model and various aspects of the country’s banking sector.

What was the role of public banks in setting up incentive loans during Covid-19?

The incentive package was a reasonable decision on the part of Prime Minister Sheikh Hasina. Like other countries in the world, our country also suffered losses in all sectors, including industries and services. Public banks have made significant contributions to our country’s economy during this period. The impact of this is that our industrial plants are still in operation. After all, if we look at the Covid period, global GDP growth has slowed, but our GDP was 7.5% during Covid-19 and now it is 6.5%.

How to implement “Three Tier Lending” to reduce Rupali Bank lending risk?

The tendency of our people to repay loans is very low. We always talk about overdue loans. However, excluding the intentionally defaulting loan client, I would say that many people also become defaulters for reasonable reasons.

Our model is for when we lend a manufacturing company for its working capital, say Tk 100 crore. Most of it is spent on purchasing raw materials for working capital. Raw materials cost 30% to 70% in the clothing industry. But the person who received the money may have bought the raw material from more than one person. Sellers, however, don’t get all the money. Because the clothes are big customers, the money remains in default.

Now, under the new three-tier lending model, raw material suppliers, producers and distributors will be united under one roof. Acting as a coordinator, we will provide the loan to all three as a package. This will reduce the pressure on industrialists or large borrowers. No one will break it easily. As a result, the risk of bank loans will be reduced. At the same time, loans to SMEs will increase significantly.

Do you think outside the conventional rules to reduce default debt?

There are two types of defaulting customers in our country: intentional defaulters and unintentional defaulters. There is no alternative to the law to collect debts from those who intentionally default. Previously, we used to use bankruptcy law to pay off this debt. We are now suing money lending court. Money laundering law seems to me to be a stronger law than that used to collect on a delinquent loan.

What kind of work does Rupali Bank do in the agricultural sector?

When mango growers became powerless soon after the cyclones, Rupali Bank gave them loans. Loans were also given to mango juice factories so that they could procure mangoes from farmers at a cash price. As a result, mango growers in the country have managed to regain their livelihoods. Apart from this, Rupali Bank has provided low interest loans to ginger and turmeric growers in mountainous areas to make the country self-sufficient. We also helped farmers find places to sell the ginger. Farmers can now sell their products directly. Our slogan for this loan product is “Bangladesh is blessed today because the mountains of the country have risen”. Ginger and turmeric can now be planted nationwide. We have granted a loan of Tk11 crore for the cultivation of ginger of which 100% has been recovered.

In addition, we provided loans to livestock producers through Milk Vita. We have a role to play so that they can sell their milk directly to Milk Vita.

Banks are turning to business loans. What type of customer are you focusing on?

Our bank is not heavily indebted either. Our five branches lend to as many clients as possible. Now we see that there is no alternative to micro loans. We must give importance to loans to SMEs. We recently held a meeting on SME loan disbursement and our goal this year is “The Year of the SME”. The economy only develops when there is balanced development. So, like other banks, we are also focusing this year on lending to SMEs.

What measures have been taken to reward managers of faultless agencies?

We always point out the bad and don’t talk about the good. Sonali Bank has over 220 branches with no defaulters and we have 144 branches. We wrote to branch customers without defaulters: “Brother customers, greetings! This branch is free of defaulters. To do this, branch managers and managers have a role to play. Those who contributed to these branches received financial rewards of 5,000 to 10,000 Tk.

Three thousand new employees have been hired in your time. How do you see this?

The role of the state is like that of a mother. Since we are a public bank, we cannot think of layoffs. We work with all employees to ensure that our bank progresses globally.

What will be your advice for new bankers?

The newcomers, however, are much more talented. If we can make it work, I’m hopeful this country will go far when it’s in the hands of the next generation. However, they have to work very hard right now and increase their skills personally.

What measures does Rupali Bank take regarding internal compliance?

We have 45 divisions each, but all work in different areas. But there is a level of risk for each department. We have created a risk register for each departmental function. The highest risk at risk will be red in the register, those that are low will be yellow, and those that are risk free will be green. As a result, management has become very simple for top management because we can easily identify risks.

Garland K. Long