RAKUB: A voyage towards growth

RAKUB is an institution, which has been assigned with the gigantic task of agricultural development in the northern region of Bangladesh. It came into existence in 1987 and its parent organization is BKB. RAKUB invests 60% of its loanable funds in crop loan. It has 376 Branches.

A bank has to efficiently manage its assets and liabilities in a way that ensures liquidity as well as profitability. In doing so it has to follow a critical path. Banks expect revenue from the investments in loan and advances. But non-performing loans do not create any revenue. So rigorous, independent and honest CRG analysis and committed monitoring of loans can prevent or at last reduce occurrence of NPL. It is true and the experience of banking industry gives testimony to the fact that all the loans and advances will not be good. But the Bank management should try utmost to keep the NPL percentage at least at its industry standard. Though there are other indicators that reflect the performance of the management, NPL percentage seems to be an important one.

The purpose of this paper is to highlight the growth trends of RAKUB. A close scrutiny of the financial statements of RAKUB shows that in comparison to FY 2013 the deposit has increased by 37% whereas the loans and advances have increased by 7% as of June 2014. The Loan to Deposit ratio was 187.21% in 2013 whereas it is 145.91% in 2014. Borrowing of RAKUB has decreased by 16%. Total assets increased by 19% in comparison to last year whereas the total liabilities increased by 20%. Interest income on loans and advances has increased by 15% whereas operating loss has increased by 9.54% in comparison to last year.

Total expenses have increased by 12% whereas the loss has decreased by 26%. Total classified loan has decreased by 4% and CL as percentage of total loans and advances has decreased 2.63% and it is now 30% of total loan. The number of profitable branches increased from 182 to 211 – an increase of 16% whereas the number of losing branches decreased by 14.06% in 2014. An analysis of business activities shows that loan disbursement increased by 7.21% whereas loan recovery increased by 13.69% and the balance of deposit increased by 36.71% in 2014 compared to 2013. During the last 5 years, the number of borrowers increased by 2.74% and the amount of loan increased by 52.98%. The number of depositors increased by 171.22% during the last 5 years whereas the amount of deposit increased by 77.61%. It is evident from the foregoing analysis that RAKUB is improving gradually in different dimensions except capital adequacy. Due to accumulated losses capital has eroded and it has to be refinanced by the Bangladesh Bank through increasing its paid up capital.

Independent valuation of securities, filing of cases at the right time, proper monitoring of loans, correct analysis of demand for the product of the loan applicant and position of the borrower’s business firm in the industry, insurance of greater amount of equity financing by the borrowers arrangement with the concerned Ministry of the government for earlier settlement of the cases by the courts improved customer relationship management can help improve the liquidity and profitability situation of RAKUB.