Private banks need corporate tax cut to tackle virus fallout: AB Bank MD

A top banker has sought policy support – including a reduction in corporate tax on private banks – allowing one of the country's vital sectors to triumph over the stress of the Covid-19 pandemic. 

"To enhance the capacity of private banks, a reduction in the corporate tax of this sector is needed for a limited time. It will help the banking sector mobilise funds," said Tarique Afzal, managing director (MD) of AB Bank.

He called upon the government to consider this proposal in the national budget for fiscal year 2020-21 to be placed in parliament on Thursday.

Currently, banks pay corporate tax at 37.5 percent and the fourth generation banks at 40 percent on their profit.

In a recent interview with The Business Standard, Tarique Afzal said, "Banks were facing a liquidity crisis as depositors were withdrawing money from banks fearing an unprecedented situation due to the global novel coronavirus pandemic."

To ease the liquidity pressure, he said, the Bangladesh Bank had reduced the cash reserve ratio and statutory liquidity reserve. "However, private banks are still missing government deposits. As the banks have started implementing a single-digit lending rate from April 1 this year, banks are struggling to manage the cost of funds."

"If banks get more deposits from the government, it will be easier to implement the single-digit lending rate successfully," he added.

The government had, earlier this year, decided to park 50 percent of its development and revenue budget with private banks as part of its concerted effort to enforce a single-digit interest rate.

The finance ministry, in a notice in January, also asked the autonomous, semi-autonomous and government companies to keep 50 percent of their surplus funds at the lenders at a six percent interest rate.

Tarique Afzal said they have signed agreements with the central banks to disburse loans from the refinance schemes under stimulus packages.  

"During this pandemic, everyone is gaining new experience," said the AB Bank managing director.

"Most of the strategies we employ depend on predictions. All countries and their governments are unfamiliar with this situation. So, everyone is putting out fires. Our Prime Minister Sheikh Hasina has already announced several stimulus packages, worth around Tk1 lakh crore, to revive the economy."

The AB Bank management has taken various measures for the safety of both employees and customers. The bank is maintaining social distancing at the workplace.

Meanwhile, all employees at the bank are sacrificing a small portion of two months of their salaries. Employees, up to principal officers, have agreed to sacrifice three percent of their salary, and the others – from senior principal officers to the managing director – have voluntarily sacrificed five percent of their salary for May and June.

Furthermore, the bank donates money to help the poor through various organisations.

Tarique Afzal said, "The central bank instructed all banks to provide their employees with a special health allowance. Our 17 senior management officials themselves did not receive the Covid-19 allowance."

"For customers' safety, we have arranged all types of disinfectant measures at our branches. At all important branches, we are installing disinfectant tunnels to ensure the highest level of health safety," he added.