Reducing default risks by loan diversification and accelerating the economic growth

Some private commercial banks collect deposits from customers by engaging full time retail teams in the field level like multinational banks. Personal or retail loan products are offered to personal consumer stage. Commercial banks offer different kinds of loans to its customers. Some private commercial banks prefer to offer corporate loans to few corporate clients. The cause is simple; the hierarchies of those local banks are hired from multinational banks doing business in the local market. Those hired hierarchies prefer to copy their previous experiences rather than innovation.  Top managements of different private commercial banks those are hired from multinational banks generally prefer to deal with few corporate clients. That is, they are used to practice niche banking rather than mass banking. On the other hand the multinational banks have been continuously going through innovation and spreading their newer products-both of assets and liabilities- into different segment of borrowers and depositors.

In the name of corporate banking the private commercial banks run after few selected and famous group in the market. For example, a reputed ship breaker has the capacity of cutting 50,000 tonnages of scrap ships all over the year. Here, we assume the said ship breaker imports 5 scrap (10,000 tonnages each, that is of medium size) ships in a year for cutting all over the year. But what the bankers do? From branch manager to the managing director of several private commercial banks always make hi, hello to the scrap ship breaker to open a deferred LC( Letter of Credit) from their banks. If the ship breaker become convinced- the successful bank (that could convince) will be capable to open a deferred LC of 270 days tenor at least, amounting around TK 35.00 crore along with approximately TK 2.00 crore Time Loan of 30 days tenor for payment of custom duty. What happens at long last? By being induced by the excessive profit seeking private commercial banks managements, the ship breaker become engaged in overtrade. We know, his capacity is- to import 5 scrap ships of 10,000 tonnages each in a year. But he opens eight (8) to ten (10) deferred LCs to import scrap ships from different private commercial banks. Result is, related banks have to suffer when payment by the ship breaker is blocked. Non- payment is usual. Cutting capacity, marketing capability, market demand don't permit the scrap ship breaker to go for overtrade.  Though the ship breakers company is a proprietorship one, it is reported as corporate loan into the Loan Statement sent to Head Office considering the size of the loan. Not that,  this kind of financing by private commercial banks are taking place in case of ship breaking industry only. It is happening in every sector. Few large borrowers or corporate bodies are getting all out support from all private commercial banks. By this way; funds are being blocked in our banking industry when the economy is facing trouble all over the world, In this situation the bankers should change their mindset. Instead of helping the big shots to be more bigger (giant like) spreading the depositors money in different sectors, in different segments could help reduce credit risk. Utmost  priority ought to be given to the relatively small and productive borrowers, so that; the banking sector would get a respite from increasing the percentage of classified loans. It is reportedly known from news papers that the percentage of classified loans have been increased substantially in the first quarter of the current year.

Spreading the depositors money in different sectors and different segments of the economy will help accelerate the same to grow substantially by minimizing the default risks or credit risks. Moreover, the depositors will feel better. That is; the entire stakeholders would be benefited