8/10/2019 Rvised Discussion Summary With Aziz Ahmed

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Summary of Discussion

This discussion has taken place at the office of BRAC Bank on 28 thMay. According to Mr

Ahmed the benefits of IT in banks are manifold. IT leads to better and faster decisionmaking ith more efficiency and considerable cost reduction. The benefits can be broken

don as follos!

". Greater effective control over branch management:#ifferent management le$els in

the banks ha$e discretionary limits for credit authori%ation& generally managers of a

branch ha$e the discretionary limit of a small amount hile the larger loans are

appro$e by credit committees or the board of directors. The branch managers often

$iolate the credit authori%ation limits they are alloed& sometimes' the managers ill

allo customers to dra credit o$er the amount authori%ed by the credit committee or

the board of directors. In the absence of suitable computer systems' top management

cannot stop this before the unauthori%ed limits are alloed' and hen they e$entually

disco$er this' it is difficult to do anything as the customer has already taken the credit.

These unauthori%ed credits often turn into default loans.

2. Profitable use of financial resources:At present' it is difficult to manage li(uidity in

the most efficient manner. It is impossible to report the a$ailability of cash in different

branches of a bank in a timely manner ithout a good computer system. As a result'

many branches of a bank end up ha$ing e)cess cash in its $aults hile another branch

has shortage of cash. Also' in$esting the e)cess cash become difficult and there is a

loss of re$enue. Banks using IT en*oy competiti$e edge in this regard.

+. Cost control:IT pro$ides details of e)penses incurred in a timely manner and helps

decision,makers manage costs effecti$ely.

-. Motivation! Banking is a ser$ice,oriented business. Modern banks should be

knoledge based' otherise it ill not sur$i$e in the e$er,changing orld. o' people

inside the bank should kno clearly about the corporate goals and $isions' different

products that the bank offers and ho to make the best use of their time. IT makes it

possible to track the performances of indi$idual officers and recogni%e and reardthem effecti$ely. /erformance of loan portfolios created by different officers of the

bank can be tracked. 0fficers can be rearded here the loan portfolios are profitable

and reco$ery is good& on the other hand' here the loan portfolios are not profitable

and reco$ery is not good' the officers can be penali%ed. This ould bring about

responsible banking and ould strongly moti$ate bankers to gi$e profitable loans and

make sure that defaults are kept to a minimum.

1. Freed up resources! At present a branch manager has to sign a lot of $ouchers and

papers. IT can free him from this type of routine ork so that he can concentrate more

on customer ser$ice.

8/10/2019 Rvised Discussion Summary With Aziz Ahmed

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. Objective analysis! Computeri%ed system pro$ides the scope of more ob*ecti$e

analysis of credit proposals. Built in or preset models help to determine the risk factors

by considering a lot of factors. The processing time ill also reduce significantly. At

present the proposals are submitted to the branch management. There they process it

and forard it the credit di$ision through proper channel. The decision,makers often

find that the loan file lacks necessary papers. o they ask for (ueries to the branch. 3ile

mo$ement takes enormous time. 4oan proposals' as a result' need to 5 months for

authori%ation if not longer from their initiation. In the meantime' the bank loses the

profit it could earn o$er this period and the borroer loses the market potentials. If the

credit authori%ation system is computeri%ed' information re(uired could be obtained

and processed in a timely manner. Credit information can be forarded ithin seconds

and the hole process can be completed in a short time.

6. Report Generation! Banks need to prepare a lot of reports. 3or loans o$er " crore'banks ha$e to prepare statutory reports for Bangladesh Bank. 3urthermore' CIB of

Bangladesh Bank may ask for special report in the specified format. In most of the

banks' especially larger ones' a large number of people remain alays busy in finding

the information' processing them and preparing the reports e$ery day. 7hereas' in an

IT integrated bank' the installed program automatically prepares the statutory reports

at the end of the period. It is a ma*or benefit of ha$ing IT in the bank. A research in

/ubali Bank shoed that if IT is installed' the cost of installation could be reco$ered in

a single year from *ust sa$ings reali%ed in processing statutory and other reports.

8. Legal proceedings! Banks ha$e to appear in courts for legal proceedings against the

default loans. This problem is more acute for larger banks. ome of the larger banks

ha$e se$eral thousand cases pending in different courts and ithout appropriate

Management Information er$ices' it is impossible to properly track the default loan

cases.

A good loan does not default. 4ack of ob*ecti$e analysis gi$es birth to bad decisions and

burden of bad debt for the banking sector. IT can reduce that significantly. Appropriate IT

can pro$ide infuse discipline into the banking system hich is no essential for sur$i$al

and future groth of the banking industry in Bangladesh.