the problems prevailing as well as to be encountered in bangladeshi perspective can be analyzed...

8/12/2019 The Problems Prevailing as Well as to Be Encountered in Bangladeshi Perspective Can Be Analyzed Under the Foll

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The problems prevailing as well as to be encountered in Bangladeshi perspective can be analyzedunder the following headings: 1. Mass Illiteracy Level:The majority portion of people in Bangladesh is illiterate in general education. Having beenunable to read and write in English it is the most important problem for ban!ers to implement

online ban!ing services. "s e#ban!ing services gets subject to fraudulent activities due to lac! ofability of people from different wal!s of life to maintain account activities re$uiring handlingsophisticated software tools to be provided by different ban!s for online purpose it is almostimpossible for different ban!s especially covering mass customer base even from rural areas.

1. 1.?? Lack of ICT Knowledge and Skills:Technology literacy is still very limited in most developing countries. There is a shortage ofs!illed wor!ers among ban!s a !ey issue in moving forward with using information technologyin business. But in order to offer and maintain e#ban!ing services without any fault ban!s needs!illed manpower. But in Bangladesh the ban!s are suffering due to inade$uate s!illedmanpower. They have to hire manpower from foreign countries to overcome this problem.%therwise they have to provide proper training to the e&isting manpower. Both will result in

increased operating e&penses.'. 2.?? ( Infrastructure:The other challenge for e#ban!ing is well developed infrastructure.( )nformation and*ommunication Technology +)*T, infrastructure is prior most to offer and to implement e#

ban!ing services. *ommunication infrastructure such as )nternet -" Telephone lines must beade$uate for e#ban!ing. )n Bangladesh due to unavailability of computer systems and )nternetinfrastructure by the majority of people ban!ing sector is facing lot of problems or challenges.Especially )nternet is the major problem because of /ow bandwidth and low speed for ban!sintending to go online.

1. .????? !ower "isru#tion:

"nother major problem is fre$uent Electric 0ower disruption. This will create lot of problems ine#ban!ing activities which are basically depending on power supply. )t will force the ban!s todepend on generators 12 hours 3 day resulting in high operational cost. Besides customerstransacting from home will face problem due to disruption while conducting e#ban!ing activities.

1. $.????? %sta&lis'(ent %)#enses:)nitially ban!s have to invest huge amount of money in order to provide e#ban!ing services.They have to buy and install the re$uired systems and facilities which lead increasedestablishment e&pense. They have to incur heavy maintenance costs also. 4or well#established

ban!s commercial ban!s of Bangladesh the establishment cost may not be a problem. But forsmall and new ban!s it is very difficult to invest such huge amount even may create financialcrisis. 4aced with budgetary constraints ban!s consider the additional costs of )*T spending astoo big investment without immediate returns.

1. *.????? Lack of +wareness and ,nderstanding of t'e -alue of % /anking:5ost indigenous ban!s in Bangladesh have not ta!en up the use of the )nternet as their ban!ingway because they fail to see the value of e#ban!ing to their businesses. 5any thin! e#ban!ingneeds an additional cost that will not bring any major returns on investment.

1. 0.????? ,navaila&ility of % /usiness !ractices:Having a -eb site which is a pre#re$uisatoryis for online operation is not e$uivalent to having awell#visited -eb site. %ne reason is that there may be no critical mass of users in Bangladesh for


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unavailability of )nternet facilities by people. %ther reason may be that mass people are notaccustomed with using )nternet platform for day#to#day shopping ban!ing and so on.

1. .????? Legal ra(ework:

/egal framewor! is plying a crucial role in facilitating e#ban!ing system and in its growth.)nstead of strict regulation a country should ma!e some amendments in order to coincide withthe e#ban!ing practices. Bangladesh has not yet set a comprehensive legal framewor! for e#commerce in general and e#ban!ing in particular. But mostly in developed countries they havedeveloped a comprehensive legal framewor! for e#commerce which includes e#ban!ing.The *entral Ban! of Bangladesh has not clearly mentioned yet its role in regulating the e#

ban!ing system in its governing legislation. )t has some short comes such as e#signature lac! ofsignificant penalties for frauds and other abuses and lac! of ade$uate provision for e#ban!ingespecially e#payment.

1. 3.????? Socio Cultural +s#ects: ormally customer(s confidence and trust in traditional ban!ing system will ma!e customers

less li!ely to adopt new technologies. ew technologies will not be successful until customersare satisfied with privacy and security aspects. )t also re$uires some time to earn confidenceamong the customers even it is easier and cheaper than the traditional methods. )n Bangladeshthe customers are in a position with far away from technological orientation. This is also notforcing customers to demand modern ban!ing services and thereby hindering the prospects of e#

ban!ing.1. 4.????? Security:

6ecurity is another foremost re$uirement of e#ban!ing as the internet is inherently unsecured.6ecuring the process in e#ban!ing involves authenticating both customer and ban!er and

protecting the information to be transmitted from interception. This authentication can be doneusing user )7 and passwords. Ban!s should ta!e effective steps for the interests of customersfrom data tampering and hac!ing. 6oftware failures can also destroy entire portions of a networ!and bring huge losses. )n e#ban!ing system there are many ways in which private informationmay be accesses by attac!ers. "nd this information could be used to ma!e fraudulenttransactions that could lead to a loss of money. Being first in corruption four times successivelyit is also the serous concerning problem in case of Bangladesh as attac!s might be whether fromoutsiders or from insiders such employees staff etc. can not be ignored.

1. 15.? Standardi6ation of Software:%ne of the major issues in E#ban!ing is the standardization of software which is necessary tooffer e#ban!ing services. 0roven high $uality software is a must for high#tech ban!ing services.4or the sophisticated services the standardization of operating systems systems software andapplication software throughout the ban!ing industry is a necessary condition which may haveto be pursued. The unavailability and s!ill needed to operate such software are also impeding thegrowth of e#ban!ing in Bangladesh.

1. 11.? Lack of Initiative fro( Central /ank:"ll ban!s are in need of smooth clearing. -hile we see )n )ndia 8eserve Ban! of )ndia initiallytoo! step to interconnect all ban!s operating in )ndia for smooth transaction and chec! truncation

purposes. But in Bangladesh in this age of 1' st century all ban!s are re$uired to conduct


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clearing house mechanism and che$ue settlement till today manually. But it can be said thatwithout online che$ue settlement and other clearing mechanism it would be totally impossiblefor ban!s to transact online.

1. 12.? Lack of Co(#liance:5any of ban!s providing plastic cards in Bangladesh are not subject to any consumer act. 6ome

ban!s hide necessary information while issuing cards to customers and then later charge morethan proposed charges based on the hidden information. Even educated people are also bombarded by the techni$ues of ban!s. *ustomers get faced serious cost burden because of suchanti#consumerism attitude which ultimately leads to un#trust regarding those cards. Thereforedifferent cards especially credit card are not becoming so popular in Bangladesh. This serious

problem is ma!ing bottlenec!s towards the growth of popularity of e#ban!ing to some e&tent.1. 1 .? Lack of +TM:

Though a few ban!s in Bangladesh are providing initially "T5 facility but this facility is rare indistance areas even not available in district town. %nly customers living in four city corporationareas avail to reach such "T5 facility. -ithout this type of basic re$uirement ban!s and its(customers are hardly able to capitalize on e#ban!ing facilities.

1. 1$.? %(#loy(ent Issue:%ne of the most important problems in Bangladesh is un#employment problem. E#ban!ing practices might reduce the number of employees in the front office in Bangladesh leading tomore people un#employed. 8ight now ban!ing sector occupies the majority of employment.Hence there might be a tremendous affect on employment level due to full e#ban!ing practices.

Problems and prospects of banking industry in Bangladesh

The central bank has finally approved nine more banks in addition to existing 47 commercialbanks in Bangladesh. Three new NRB commercial banks, sponsored by non residentBangladeshis !NRBs", and six private commercial banks !#$Bs", have been approved aiming tohelp boost the inflow of foreign exchange and strengthen the ongoing financial incl%sionprogrammes thro%gh bringing %nbanked people %nder the banking network respectively. Theletters of intent !&o's" (have already been iss%ed to the sponsors of s%ch approved banks.There have been many significant developments in the economy of Bangladesh since )***)**+, the central bank stated, explaining the economic context and rationale behind iss%inglicences in favo%r of new banks. The economy has grown and the banking system has becomemore competitive b%t there are still a large n%mber of %nder banked people in Bangladesh.

Recent estimates from a s%rvey cond%cted by the 'nstit%te of icrofinance !'o-" fo%nd that only4 per cent of the nearly /*** ho%seholds s%rveyed do have access to banks and micro finance

instit%tions ! -'s" for loans. The pop%lation per branch !)+*0 " and the ratio of loan acco%ntsper +*** ad%lts !4)yrs" s%ggest that the o%treach of the formal financial sector in Bangladesh islower than that in 'ndia !+441 and +)4 respectively" and #akistan !)*24* pop%lation perbranch and 47 loan acco%nts per +***", according to the statement of 'o-.

Bangladesh Bank ass%mes that the new banks will help increase the 3%ality of banking servicesby increasing competition in the banking sector. They will also be able to meet the %nf%lfilleddemand for credit by the private sector whose needs have grown in line with a fast expanding


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economy. The central bank noted that, for new banks the ratio of opening r%ral and %rbanbranch will be + + which will help increase bank branches in r%ral areas and improve financialincl%sion. B%t the home tr%th is5 no bank can expand in the r%ral areas before concentrating andmaking b%siness in %rban areas.

6arlier, the iss%e of granting licenses to new banks ca%sed many to raise their eyebrows.%estions were being asked by a%thentic experts, bankers and people even on the board of

directors of the central bank abo%t the wisdom of allowing more banks, a sector that had beenstr%ggling hard to cope with the problem of li3%idity shortage for years together. The bankingsector is already sat%rated with 47 commercial banks. There was no logic to allow new banks atthis moment of the co%ntry. The new comers will create an %nhealthy competition in bankingservices, affect stability of the sector and ca%se profitability of the existing banks to s%ffer. Theentry of more banks will trigger a flight of h%ge f%nd incl%ding Tk 20.** billion from existingbanks to place as paid %p capital against new banks5 this will lead to f%rther deteriorations of thestringent sit%ation already prevailing in the banking sector. The similar incident will take placefor 3%ality employees of the existing banks. 8ll these will lead to a greater mismatch betweentheir credit and deposit ratio and ac%te shortage of good bankers. The banks will be forced to gofor risky investment after collecting deposit at high rate from an already sat%rated market. 't willserio%sly affect the overall bank b%siness and the ind%stry as well.

Banks are to facilitate all kinds of economic activities and finance many other needs of thepeople, in both %rban and r%ral areas. B%t overcrowding of the banking sector is not at alldesirable as this, instead of meeting those ob9ectives, wo%ld create problems for the sectoritself, partic%larly the existing operators in the sector. This might even adversely impact the vitalsectors of the economy in the process. 't was %nlikely that the board of directors of BangladeshBank were not aware of that fact. :et they were trying to select the right ones since the

government is %nrelenting in its decision to allow new banks. ;pening %p of new banks onpolitical consideration, as reported time and again, may red%ce the confidence of the clients inbanks as well as impair the management 3%ality of the overall banking sector.

eanwhile, some spec%lators state that as soon as new banks kick off their operations a heavypress%re on deposits of existing banks wo%ld be exerted. The latter are likely to see a flight ofdeposits while their existing loan liabilities incl%ding non performing loans !N#&s" will remain atan %nchanged level. This is likely to ca%se a mismatch between their deposits and o%tstandingamo%nt of credits or loan portfolio.

Now that the central bank already approved new banks and iss%ed the &o's, it will be 9%stbeating abo%t the b%sh to say anything to the contrary. Rather, now it is better to design how allthese banks can be managed smoothly. 'n this regard the following meas%res may beimplemented

< The new banks sho%ld introd%ce new and innovative services and sho%ld scale %p theirprod%cts for the sake of making the government decision meaningf%l.


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< There is no denying that the 3%ality of the sponsors largely infl%ences the 3%ality of operationof banks as s%ch sponsors play an important role in the decision making. =o, the central bank

will have to closely examine the track records of the sponsors and it m%st not give in to politicalpress%re of any sort on this iss%e. The 3%ality of the bank directors sho%ld be maintainedscr%p%lo%sly.

< The central bank may concentrate its attention on the colo%r of money of the proposeddirectors who will be investing as the paid %p capital.

< The central bank m%st have to play the role of a watchdog in case of shopping the investmentclients of new banks from existing banks by approving the higher limit then the presento%tstanding.

< The central bank m%st have to be vigilant in examining the proposed investment clients of newbanks, partic%larly those whose cases have to be resched%led. >etting resched%led, the sickclients in the existing banks become very m%ch performing in new banks for the time being inthe backdrop of opening new banks in the market.

< The central bank needs to re3%ire to consider several other iss%es, prior to giving effectivepermission to new banks, incl%ding ownership 3%ality.

< The vital iss%e that deserves priority attention of both central bank and the government isbetter banking coverage of the hitherto neglected r%ral areas. The new banks may be asked toserve the r%ral people extensively.

< ;n the top of everything, both the central bank and the government will have to ens%re the

entry of stronger players in the banking arena and keep close watch on the effects of s%ch anentry on the overall banking ind%stry.

< The Bangladesh Bank and Bangladesh 'nstit%te of Bank anagement !B'B " have to takepreparation on str%ct%ring the banks by training %p the bankers. Beca%se market will beoversat%rated as soon as the new banks start operations. The precipitations of banks mayappear at the bottom of the banker of banks in Bangladesh. Time has arrived5 the possibility ofmerger of weak banks cannot be la%ghed away.

=till we hope for the best. The newly approved three NRB commercial banks namely, NRB$ommercial Bank &td, NRB Bank &td and NRB Bank &td will bring ?=@+ *.** million as paid%p capital of the non resident Bangladeshis !NRBs". 6xpectations of the people abo%t the sixapproved #$Bs, s%ch as ?nion Bank &imited, odh%moti Bank &imited, the -armers Bank&imited, eghna Bank &imited, idland Bank &imited and =o%th Bangla 8gric%lt%re and$ommerce Bank &imited, are 3%ite high.

Now the nation is passionately staring at the f%nctions of the new born banks with a ray of hopeof even development of the people of all the strata in the days to come.

the problems prevailing as well as to be encountered in bangladeshi perspective can be analyzed...

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