The government's move to set up a digital bank and develop a machine learning and artificial intelligence-based credit rating system will bring a positive change in the banking sector, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank Limited (MTB). 

The measures will help clients get banking services with the utmost convenience, he said in an interview with The Daily Star yesterday.

On June 1 Finance Minister AHM Mustafa Kamal in his budget speech said a digital bank would be set up within the next fiscal year to broaden and accelerate financial inclusion efforts.

A Bangladesh Bank committee is engaged in working out strategies to broaden and accelerate financial inclusion efforts, Kamal said.

"At the same time, we are developing a machine learning and AI-based credit rating system. With these, it will be much easier to spot fake and anonymous borrowers, and at the same time, it will be considerably simpler for genuine borrowers to obtain loans," said the finance minister.

Fraudulent activities can be tackled largely when an AI-based credit rating system is introduced, said Rahman, also a former chairman of the Association of Bankers, Bangladesh, a platform for managing directors of banks in Bangladesh.

Banks will have to create a database of their clients to operate their credit scoring system, which will bring positive changes in the banking system, he said.

The government should have taken a detailed roadmap in the proposed budget on how to recover non-performing loans (NPLs) from the wilful defaulters and strengthen corporate governance in the banking sector, he added.

"It is important to havea definition explaining who the wilful defaulters are," said Rahman, who joined the MTB in December 2019.

Although the finance minister in the budget speech stated that measures would be taken to reduce defaulted loans, a clear programme should be rolled out to this end, said Rahman.

The NPLs in the banking sector stood at Tk 131,621 crore as of March 31, up 9 per cent from three months ago and 16 per cent from a year earlier, showed data from Bangladesh Bank.

Commercial banks have been requesting the government for long to reduce the existing high corporate tax rate of 37.5 per cent as it has created a burden on them, said Rahman, who also served Dhaka Bank and Brac Bank as a managing director.

Besides, taxation on provisioning should be withdrawn, he said.

As per the rules, banks have to pay taxes on provisions, which have to be kept against both classified and unclassified loans.

"I hope that the government will take more initiatives to reduce the current stress in the foreign exchange market by increasing the inflow of US dollars," he said.

Some banks are now unable to open letters of credit in favour of importers, putting an adverse impact on the economy, he said, adding that more initiatives should be taken to address the issue.