Md. Zillur Rahaman: The banking sector in Bangladesh is passing a very critical time. Currently, the sector is facing three major challenges: a big volume of non-performing loans, the implementation of single digit interest rate and the COVID-19 hit recession. The big budget deficit of the current fiscal year will also take a toll on the banking sector in addition to the above three big challenges.
Now, only cost minimise is the ultimate target of the banks, but also each of the bank can minimise operating cost by emphasising mobile banking, agent banking and sub-branch banking services as well as Alternative Delivery Channels’ products. Under the present circumstances, the sub-branch has added a new dimension in the banking services and in the same time, definitely it will reduce the cost of banking operation.
The banking system has become smarter with the invention of mobile banking in 2011. As the conventional bank doesn’t exist everywhere but mobile banking can’t fill-up the vacuum of big transactions. This is why, Agent Banking Service (ABS) has been introduced and it was much better than mobile banking services, for this, the BB issued an ABS guideline in 2013, the first bank started its full-fledged agent operations in 2016. ABS service is becoming more popular day by day to the clients in remote area in terms of less costing way after its inception.
Needless to say that ABS service has also a limited scale banking and financial service for those living in remote areas across the country. ABS can operate bigger transactions than the mobile banking, but as like mobile banking, ABS has also some banking limitations: it can’t fill-up the vacuum of branch banking.
| ব্যাংক, ব্যাংকার, ব্যাংকিং, অর্থনীতি ও ফাইন্যান্স বিষয়ক গুরুত্বপূর্ণ খবর, প্রতিবেদন, বিশেষ কলাম, বিনিয়োগ/ লোন, ডেবিট কার্ড, ক্রেডিট কার্ড, ফিনটেক, ব্যাংকের নিয়োগ বিজ্ঞপ্তি ও বাংলাদেশ ব্যাংকের সার্কুলারগুলোর আপডেট পেতে আমাদের অফিসিয়াল ফেসবুক পেজ 'ব্যাংকিং নিউজ', ফেসবুক গ্রুপ 'ব্যাংকিং ইনফরমেশন', 'লিংকডইন', 'টেলিগ্রাম চ্যানেল', 'ইন্সটাগ্রাম', 'টুইটার', 'ইউটিউব', 'হোয়াটসঅ্যাপ চ্যানেল' এবং 'গুগল নিউজ'-এ যুক্ত হয়ে সাথে থাকুন। |
The Bangladesh Bank (BB) issued the circular vide Banking Regulation & Policy Department (BRPD) circular 28 dated December 27, 2018 allowing the ‘banking booth’ of scheduled banks to act as a sub-branch for reaching the banking service to doorstep of the unbanked rural people and as part of business development centres. In the last year, the central bank issued the BRPD circular 28 dated December 3, 2019 saying that the change was made with a view to make the banking services more communicative and clear to the customers.
The concept of sub-branch is familiar in many countries but BB in early December 2019 has published a circular to convert the booth banking to sub-branch. A new horizon has been added to our banking services through the introduction of such banking operations and services over the country. The sub-branch is functioning as a new dimension in the banking sector of Bangladesh in minimum cost but the same service as branch.
For a sub-branch, a bank needs only 250 to 300 square meters (sqm) of space but a full-fledge branch needs minimum 2500 sqm space. So, the banking services is possible to render at a minimum cost through the sub-branch. The management cost drops by 90 percent in the sub-branch.
According to the sub-branch banking policy, at least two officers but not more than ten are appointed at a sub-branch, having not more than 1,000 square feet space. Fees, charges and commission of banking services is comparatively less here if compared to ABS and mobile banking.
The word ‘booth’ confused many customers as they relate its functions with the function of ‘ATM booth’, hindering achievement of the targets behind the launch of such installations of the banks. Hence, the central bank had renamed the ‘banking booth’ as ‘sub-branch’ of the banks to eliminate any confusion.
Such sub-branches are supposed to operate within limited expenditure under the supervision of a nearby proficient branch of a bank. Under the central bank’s instructions, fees, charges and commissions of banking services are supposed to be lesser at such sub-branches compare to ABS and mobile banking. In addition, transactions at the sub-branches are carried out on a real time basis and customers receive instant SMS and printed slips against their transactions.
To set up such sub-branch, the banks are encouraged to get approval from the BB based on the approval of the respective bank’s board. The central bank, however, preserves the rights to close any such booth without prior notice.
Before setting up the sub-branch idea, the BB has made a policy regarding setting up of a sub-branch. During formulating the policy, BB observed that most of the banks were setting up their branches in major cities, including Dhaka and Chittagong. The banks are not interested to open a branch in rural areas. Although remote areas now have agent banking, all banking services cannot be provided through the system. So, the policy of setting up “sub-branch” was made considering some prevailing situation of cost effective way and market potential of the unbanked people.
According to the central bank data, as of December 31, 2019, twenty-eight banks have got permission from the BB to open sub-branch and of them 21 banks have already opened sub-branch services in rural and industrial areas. A total of 393 sub-branches are catering services to their clients across the country.
As of December 31, 2019, NRB Commercial Bank has the highest 147 sub-branches in operation in the country. Recently IBBL also crossed more than 100 sub-branch open. Other banks those are rendering service through sub-branch are IFIC, Jamuna, SIBL, SBAC, NBL, UCBL, SEBL, One Bank, Dhaka Bank and Premier Bank.
Among the Bangladeshi commercial banks, Dutch-Bangla Bank has been rendering such operations since long over the country through their ATM booths but named ‘Fast Track’ and also IBBL in the name of ‘Sebaghor’ The bank has recruited 3 to 5 staff in every ATM centre where they are opening account, taking deposits and issuing credit and debit cards. DBBL has as many as 949 Fast Tracks throughout the country.
The new banking system was aimed at bringing unbanked and underprivileged people under the banking network. Besides, sub-branch banking can address the bank’s liquidity crisis by generating liquidity at the roots level. A sub-branch is installed nearer to the business places and spares a lot of hassles. Already many people are now doing their banking via sub-branches, which have opened up a new horizon of banking, taking the services to the doorsteps of people, minimizing cost.
See More:
◾ A Banker’s Role in Making Borrowers Defaulters
◾ Are Cryptocurrencies Financial Assets?
◾ Default loans: Cancer of the banking system
Most of the banks are not interested to open a branch in rural areas as it is costly and kills long time to run profit. Although remote areas now have mobile banking and agent banking, all banking services cannot be provided through the two systems. So, the policy of setting up “sub-branch” is undoubtedly a good initiative which is cost effective and client friendly.
Writer: Md. Zillur Rahaman
The writer is a banker and freelance contributor.
[Disclaimer: The views of the write-up is writer’s personal.]
