State banks lag in tech

State-owned banks lag far behind their private peers in installation of core banking solutions (CBS) and internet connectivity to avail themselves of the facility of automated cheque processing and electronic fund transfer systems, a top central bank official has pointed out.
“Most private and foreign banks have already installed CBS, but none of the nine banks run by the state did,” said Chowdhury Mohidul Haque, executive director of Bangladesh Bank.
“Even those did not seek any help from us,” Haque added.
A BB circular issued in the first week of February insisted on automation of all bank services through CBS installation by the year-end.
CBS records transactions, maintain customer information, calculate interests on loans and deposits. The data, instead of huge ledgers, are stored in databases in digital form. The same software can be installed in various branches of a bank and can be interconnected through the internet or telephone lines to form a core banking network of the bank.
The advantage is, a customer can operate his or her account from any branch of a bank and if the bank has internet banking or ATM (automated teller machine) facilities, then operation of any account is possible from virtually anywhere.
Bangladesh's central bank has been working for the past two years on transforming the banking industry into a digital one replacing the age-old manual and time-consuming systems. As part of Bangladesh Bank's move to facilitate quick services to banks, now 48 in number, automation of its clearinghouse and the Credit Information Bureau is underway.
Of the scheduled banks, private banks, including nine foreign ones, are 30, while state banks four commercial and five specialised banks are nine.
BB latest data shows CBS adoption in 20 local private banks and all nine foreign banks.
However, a few state banks have connected some of their branches with internet facility.
The central bank has already set up the data centre of Bangladesh Automated Clearing House (BACH) at Motijheel and a disaster recovery centre at Mirpur in the capital.
“The clearing house, the key to the banks' automated services, will go into full-fledged operation in Dhaka city soon,” said Chowdhury Mohidul Haque of Bangladesh Bank.
The BB in another circular has alerted all commercial banks that no non-MICR (magnetic ink character recognition) cheque will be accepted by the clearinghouse after the month of April. Once this new system is enforced, an account-payee bank cheque will be settled in a few minutes instead of few days.
The central bank official said a bank has to have internet facility in its branches to avail itself of the BACH facility.
Asked about online banking, Janata Bank Managing Director SM Aminur Rahman said his bank now puts its all efforts in bringing all of its branches under online network by this year, with the 74 Dhaka branches on top priority.
In this context, Rahman pointed to the fact that maintenance of online network is expensive and the purchase of equipment for this purpose needs to comply with the government guidelines, including public procurement rules.
Janata's top official also pointed his finger at the larger number of branches of the state-run banks than the banks owned privately.
Janata has 851 branches across the country with 74 in Dhaka city alone, while many private banks do not have such a number of branches in the entire country.
Helal Ahmed Chowdhury, managing director of the largest private bank Pubali Bank, said they are fully ready to get connected with the central bank's BACH system.
The bank has 386 branches, by far the highest among the private banks in the country.
“Some 52 branches have already gone online and another 100 will come under the network at the end of 2010,” said Chowdhury.
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