"The MoUs have encouraged the banks to go for large loan syndication in lieu of taking all credit risks in one shoulder," Khan said in an interview with The Daily Star. "This will certainly improve the risk management position of all NCBs and bring financial discipline in the money market."

The central bank has recently signed MoUs with the NCBs limiting their lending authority to only five per cent of their paid-up capital.

A senior banker who has served in various positions in the central bank and also in Krishi Bank, Khan talks about interest rate, credit control, banking reforms and the health of Janata Bank.

"It is true that the interest is still very high," Khan admits. "Huge non-performing loans, high administrative cost, higher rate of interest on term deposits are the principal reasons for the prevailing high rate of interest. However, responding to clarion call of the finance minister, Janata Bank and other NCBs have reduced the lending rate on several occasions during last two years."

He said, at present, weighted average lending rate is 11.5 per cent, which is quite tolerable. "In case of priority sector like textile, information and communication technology (ICT) and agriculture, we extend credit at 10 per cent. For export related credit, the interest rate is as low as 7 per cent."

"We are constantly trying to cut our cost of fund as well as overhead expenses to reduce interest rates further. Interest rate to rural sector including fishing and livestock has been reduced," he added.

Asked whether he finds any problem in allowing loans and advances because of credit control, Khan said, "Not at all, because we have not reduced our credit port folio. Bank is at liberty to allow loans and advances to a single borrower up to 5 per cent of its paid up capital, which is of course a significant amount. While allowing advances to big groups, we can go for syndication. By and large credit control shall bring down classification, reduce NPL, strengthen recovery process."

"Furthermore, large cushion has been created due to write off of huge bad loans as per central bank's guidelines. So, there will be no shortage of fund for credit expansion."

On the upcoming changes in the money market, Khan said, "This will create a new avenue for money market and definitely increase the liquidity flow of the market."

Without depending on the central bank, banks will be able to trade treasury bills among themselves to meet their liquidity requirements, Khan pointed out.

In this context, Janata Bank has already applied for the primary dealership, so that it can sell and purchase treasury bills on behalf of their customers.

"Electronic registry with Central Depository Bangladesh Limited (CDBL) has already been installed. A full-fledged fund management department is now under operation to manage our treasury," he said.

Regarding the reforms, Khan observed, "Much has been talked about on-going banking reforms. But I am confident that this will bring good at the end of the day. The credit risk management of NCBs, the major player in the financial market, will be improved."

"Instead of loan concentration in few hands, diversification of loans to the priority sectors like agro-based industries, SME and micro-enterprises will be the right step. Reduction of bank interest rate will definitely help our industries to be competitive."

Describing the health of Janata Bank, he said the bank is incessantly trying to uphold its image as a progressive and elevated service industry.

"In the last two years, Janata Bank has made remarkable success. Operating profit in June 2001 was only 50 million taka, which rose to 350 million taka in June 2002 and further increased to 960 million taka in June 2003. This was possible because of improved fund management, foreign exchange operation and cost control," Khan noted.

"We are expecting operating profit will rise to the tune of Tk 2 billion plus at the end of current year. Classified loans will be brought down to below 20 per cent. If we can achieve that it will be a tremendous success on the part of a NCB."

Lending strategies have been re-defined with special emphasis to agro-based industries, SME and micro-enterprises, the managing director said.

Janata Bank has also extended its area of participation in many other fields, which include special credit scheme for software developing, computer business and cyber café; women entrepreneurs financing scheme; goat rearing project; and scheme for horticulture.