Remittance inflow stays solid in March
Remittances’ upbeat start to 2018 continued into March, which saw inflows soar 20.70 percent year-on-year to $1.3 billion on the back of the depreciation of the taka against the US dollar. The local currency has been depreciating against the American greenback for the last few months, prompting Bangladeshis living abroad to remit more money through the formal channel. On March 28, the interbank exchange rate was Tk 82.96, which was Tk 79.66 a year earlier. Remittance inflow increased about 13 percent in March from the previous month, according to Bangladesh Bank statistics. March’s inflows take the current fiscal year’s receipts so far to $10.76 billion, up 17.37 percent year-on-year. A strong pick-up in global economic activities, especially in the Middle Eastern nations, also helped the country to maintain the upward trend, said a BB official. The central bank has recently strengthened its surveillance to check hundi, the illegal outlet that many turn to for moving funds cross-border, bank officials said.
Rise in imports pushes forex down in March
Foreign exchange reserves of the country dropped to $32.40 billion at the end of March from $33.37 billion the previous month. But the reserves were up nearly 1.0 per cent from a year earlier, the central bank said on Monday. The monthly decline was fuelled by a rise in imports, a senior central bank official said, adding that reserves were sufficient to cover about 10 months worth of imports for the country of 160 million people.
Pvt sector credit growth jumps in Feb despite fund crisis claim
The new monetary policy is failing to contain the private sector credit growth with the rate rising to 18.49 per cent in February although the bank owners have already bagged a number of facilities pleading liquidity crisis. The private sector credit growth was 18.36 per cent in January whereas Bangladesh Bank in the monetary policy for January-June of financial year 2017-2018 set a target of 16.8 per cent for the period. Former finance adviser to a caretaker government AB Mirza Azizul Islam told New Age that the private sector credit growth in last few months indicated that there was no problem in the supply side and no liquidity crisis either. Banks would not be able to give such amount of credit if there was any liquidity crisis, he observed. Speaking about the finance minister’s announcement on Sunday to reduce banks’ cash reserve ratio by 1 percentage point to 5.5 per cent from 6.5 per cent following demands from the bank owners, he said, ‘There was no justification to reduce CRR in the context of such credit growth.’ Mirza also said that the facility would only help banks provide credit illogically to unworthy borrowers which might turn into bad loans ultimately. The average private sector credit growth fell to 15.66 per cent in financial year 2016-2017 from 16.78 a year ago as the banks were grappling with excess liquidity. The rate, however, has been on upward trend for last few months, except in December, because of rising demand for loans from the private sector. Bangladesh Institute of Bank Management director general Towfiq Ahmed Chowdhury told New Age that the banks continued aggressive lending despite the Bangladesh Bank’s instruction to reduce loans, which turned into liquidity crisis. If ADR were adjusted by reducing lending, there would be no liquidity crisis but the banks were trying to continue with their aggressive lending, he said.
Banks achieve 71pc target in disbursement of farm loan
Disbursement of farm loan by the scheduled banks achieved 71.18 per cent of the total target in the eight months to February last as banks strengthened disbursement drives, a central bank official said. The banks witnessed a high demand for credit from the country’s agriculture sector, he added. The credit disbursement flow was satisfactory during the period, a state-run banker said. The Bangladesh Bank (BB) is now taking special care of farm loan disbursement to jack the agro-based sector of the country up, an official concerned of the BB told the FE. Besides, loan disbursement in the sector has increased due to proper monitoring of the central bank, he said adding that the BB has already advised the banks to expedite both recovery and disbursement of farm loans, another BB official said. The official expressed optimism that loan disbursement target in the sector would be achieved at the end of the fiscal year following various initiatives of the BB and proper disbursement of loan by the banks. Loans are being disbursed in large scale in the agro sector every fiscal year (FY), he mentioned. As per the BB statistics as of February 28 last, the banks disbursed farm loans to the tune of Tk 145.20 billion till July-February period. The total target was fixed at Tk 204 billion for the FY 2017-18. The private commercial banks and foreign commercial banks have disbursed higher amount of loan than the state-run banks.
Tight monetary policy comes undone
In a flurry of moves over the past seven days, the finance ministry and the Bangladesh Bank undid the tight monetary stance announced in January for the second half of the fiscal year. For instance, the finance ministry yesterday issued a notice clearing the way for private banks to keep 50 percent of the government funds, in a development that will go on to ease the ongoing liquidity crunch in the financial sector. Previously, private banks could hold 20 percent of the funds for annual development programme and 25 percent from the revenue budget. The move comes in the backdrop of the liquidity crisis among banks that began in November last year and went on to hit the stockmarket too. Earlier on Friday, Finance Minister AMA Muhith held a meeting with the directors and managing directors of banks in which he agreed to double the government deposits for private banks. The meeting was followed up with another on Sunday at the capital’s Pan Pacific Sonargaon hotel, which was attended by Bangladesh Bank Governor Fazle Kabir. A number of directors from private banks led by Nazrul Islam Mazumder, chairman of the Bangladesh Association of Banks, attended the closed-door meeting.
Only strong banks should get state entities’ deposit
Only the strong and well-managed banks should be allowed to receive 50 per cent deposit of the state entities, a leading economist of the country opined on Monday. “Not all the banks should be allowed to get 50 per cent of the government funds as deposit,” Dr. Ahsan H Mansur said in an event, organised by the Policy Research Institute of Bangladesh (PRI) in the capital. “Rather, there should be some certain criteria or guideline in this regard, so that only the strong and well-managed banks become eligible to have 50 per cent of the government deposit.” His views came while referring to the recent government move, allowing the private commercial banks (PCBs) to get 50 per cent of the government funds instead of the previous 25 per cent. Pointing to this move, the PRI executive director observed that the government should develop certain ‘investment guidelines’, so that public money is not handed over to the banks that are not credible enough. Speaking on the occasion, Dr Mansur also noted that Bangladesh economy is currently at a crossroads due to serious imbalances, both in the money market and in the balance of payments. “A wide gap is also emerging in credit and deposit growth rates in the banking system, contributing to an acute liquidity crisis in the system.” Mr Mansur also observed that some banks are trying to maximise profit by violating macro-prudential conditions, like ADR, as happened during the fiscal year 2010-11.
Rising sales of savings tools add to liquidity woes
The spiralling sales of savings instruments have caused the liquidity crisis in the banking sector, said Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh. The banking system is experiencing a declining growth in deposits for several years due to low deposit rates, he said. The savings instruments of the Department of National Savings offer interest rates, which are much higher than any bank in the market, he said. For this reason, small depositors prefer to invest in the savings instruments, he said during the launch of PRI’s quarterly publication—Policy Insights—at its Banani office in the capital. A wide gap emerged in credit and the deposit growth rates in the banking system, contributing to the acute liquidity crisis in the banking system, he said. The growth in bank deposits continued to plunge and eventually declined to only 10.6 percent in December 2017, down from the average growth of 16-18 percent, he said. Certainly, banks cannot meet the demand for credit—which is growing at 19 percent—with its deposits, which is growing at only 10.6 percent, he said. Mansur thinks the liquidity problem led to the increase of non-performing loans, which limited banks’ role as the source of revolving creditable fund and significantly reduced banks’ capacity to expand new credit.
Liquidity crisis: reasons and ways to overcome
After having excess liquidity for quite a long time, banks have been facing increasingly more demand for loans from the private sector since December last year. In this situation, a few banks have exceeded the allowable loan-deposit ratio (LDR) of 85 percent. As it is a violation of one of the macro-prudential policies, the Bangladesh Bank (BB) took action against these banks. The BB has advised banks to reduce the LDR to 83.5 percent by December 2018. It will compel banks to retain and collect a higher amount of deposit to maintain their current level of loans and advances or increase thereof. Apparently, it will augment the current liquidity crisis of banks. As a result, some banks and financial institutions are now trying to collect more funds by applying traditional strategy i.e. increasing the rate of interest. Is this shortage of liquidity in banks unexpected? I may not be wrong if I say that it is expected. A country where growth rate is 7.28 percent needs swelling amount of money to fulfil the necessities of a gigantic number of transactions at the consumer, trader and producer levels. For example, capital goods that recorded a high growth rate of 11.2 percent to $20.119 billion in 2017 from $18.092 billion in 2016 are clearly indicating an upcoming bullish trend of the private sector. Additionally, if public investment increases in future at the current rate, government borrowing from the banking sector may increase. This will further fuel the current liquidity crisis.
Experts for policy guideline on venture capital
Experts at a seminar on Monday stressed a policy guideline to reduce the risk of venture capital and take its high growth and profit through financing in high-risk projects, reports BSS. “Venture capital has a high risk, but it has also high profit possibilities. A team will have to be formed for preparing a guideline to cut the risk of venture capital and take its high profits. Bangladesh Bank or the Financial Institutions Division can take an initiative to form the team,” Chief Coordinator (SDG Affairs) of the Prime Minister’s Office M Abul Kalam Azad told the seminar. He urged the central bank to take an initiative for forming a committee immediately and prepare a policy guideline within next six weeks. Bangladesh Investment Development Authority (BIDA) organised the seminar on ‘Venture Capital and Investment Eco-System’ at Bangladesh Bank headquarters in the city. While delivering his keynote speech at the seminar, BIDA executive chairman Kazi Aminul Islam said once the committee is formed, it will identify the problems of the demand and supply sides of the venture capital and will help make the capital more effective for the country’s economy. “Normally, venture capital will be developed. But, we will have to take it under a process for taking high profit as soon as possible and making the country developed one by 2041,” he said. Noting that necessary fund is essential for creating an entrepreneur-friendly atmosphere, Aminul said the financial sector can play a vital role to ensure such environment. Bangladesh Bank governor Fazle Kabir urged both the public and private sectors to come forward for creating entrepreneurs across the country.
Part of boards, management liable for loan scams: economist
Large loan scams in the banking sector are a result of a section of board members and management officials deviating from ethical values and norms, said Qazi Kholiquzzaman Ahmad, chairman of Palli Karma-Sahayak Foundation (PKSF). Banks and the overall economy suffer as this section of people work for their own interest, he said while delivering the 17th Nurul Matin Memorial Lecture on “Ethics in Banking”. The Bangladesh Institute of Bank Management (BIBM) organised the event at its auditorium in the capital on March 31. Erosion of ethical values has been occurring for a long time and rules and norms are violated for self interest, said the economist. He called upon Bangladesh Bank to strengthen monitoring to improve ethical standards and norms among bankers.
Dhaka Bank launches transactional account ‘Shukti’
Dhaka Bank Limited has recently launched a transactional account namely ‘Shukti’ to benefit business enterprises to do more business transactions at its corporate office. In addition to get interest on this business account, account holders would get some other facilities like free online transactions, concessional price in issuing pay orders and lower rate in availing business loans, said a statement. The product was inaugurated by Managing Director & CEO Syed Mahbubur Rahman. Emranul Huq, Additional Managing Director, Khan Shahadat Hossain and Shakir Amin Chowdhury, Deputy Managing Directors, along with other senior executives of the bank and first five customers, who opened ‘Shukti Account’, were also present at the launching event.
Trust Bank launches ‘t-cash’
Trust Bank has launched ‘t-cash’, the complete gamut of Bank’s Mobile Financial Services (MFS), to bring banked and unbanked citizens of the country under the wide umbrella of its value added services. General Abu Belal Muhammad Shafiul Huq, SBP, ndc, psc, Chief of Army Staff, Bangladesh Army & Chairman, Trust Bank Limited graced the occasion as the Chief Guest and launched ‘t-cash’ at Radisson Blu Dhaka Water Garden, Dhaka on Sunday, said a statement. Fazle Kabir, Governor of Bangladesh Bank, was present at the programme as the Special Guest. Maj Gen S M Matiur Rahman, afwc, psc, Adjutant General of Bangladesh Army & Vice Chairman of Trust Bank gave the welcome speech.
Bourses to urge government to allow them buying savings certificate
Dhaka and Chittagong bourses have decided to request the government to allow them to invest in the national saving certificates at a time when the sales of the savings instruments hit all time high. Dhaka Stock Exchange will include its request on the NSCs purchase with its financial year 2018-2019 budget proposals to be placed before the National Board of Revenue today. Chittagong Stock Exchange will also make similar proposal on the NSCs purchase when it will meet NBR officials later this month. A official of DSE said that the bourse wanted to buy NSCs as a safe mode of investment and also to get tax exemption on its income from the tools. As the bourses are not allowed to invest in the capital market, they are searching a way to reduce costs on their income. Savings certificate sale went up to BDT 520.00 billion in 2016-17 fiscal year, breaking all its previous records.
Bangladesh garment accessories and packaging manufacturers want 12% corporate tax for the fiscal year 2018-19 to boost exports and attract new investments. Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), a platform of the RMG backward linkage industry, made the call in its proposal that is to be placed before the National Board of Revenue (NBR) on Wednesday in a pre-budget meeting. “Despite being a fully export oriented industry, the garment accessories and packaging manufacturers are paying 35% corporate tax,” said BAPMEA in the proposal. Meanwhile, the knitwear and woven products exporters are paying 12% corporate tax. It is 10% for the garment owners who are manufacturing products at certified green factory. It is discriminatory behaviour to the sector,” the platform explained. For the sake of the country’s economy and exports, the association urged the government to bring down the corporate tax rate to 12% for the next fiscal year for the sector.
Bangladeshi garments accessories and packaging manufacturers have made a massive new investment to seize a larger chunk of the global export market share. According to data from the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), garments accessories and packaging manufacturers have made an investment of Tk722.5 crore, with more proposals in the pipeline. Sources in the sector said this new investment focuses on producing higher quality garment accessories with an aim to increase exports and establish the sector as a direct export earner instead of just deemed. Since there is more capacity than is currently needed, accessories can be another big export earner, they opined. “Bangladesh is already well established as a sourcing hub for apparel products. Garment accessories and packaging products are key components for competition. The demand of accessories is increasing very fast at home and abroad,” Al- Shahriar Ahmed, Managing Director of Adzi Trims Ltd told Dhaka Tribune.
India plans to start the test run of a container train from Gede Railway Station to Bangladesh today in an effort to boost bilateral trade. The train will leave Kolkata’s Katapur container terminal at 9:00am for Bangladesh, said Ravi Mahapatra, chief public relation officer of India’s Eastern Railway. Only rack rails used to run over the Gede-Darsana border, which will be replaced by the container trains from now on, he said. Discussions are also going over launching new passenger rail routes between the two countries, Mahapatra said. “We are also examining the potentials of a Kolkata-Rajshahi rail route.”
Noman Group of Industries is set to expand its business in polyester-based fabric manufacturing mainly to cater to the growing demand for the manmade fiber across the globe. “We are planning to invest about Tk 5.0 billion in the next three years to set up a unit initially to produce georgette and chiffon yarn and later to manufacture fabric,” Mohammad Abdullah Zaber, deputy managing director of Zaber and Zubair Fabrics Ltd, told the FE. About 97 per cent of the country’s polyester fabric is imported from China, he said, adding that the demand for such material is also high and growing day by day. Its price is also high. The proposed unit with the production capacity of 120 million tonnes a day will be set up in Valuka, Mr Zaber said, adding that they have already selected the machines to be installed. He was talking to the FE on the sidelines of a weeklong fabric show that began at the corporate office of the Noman Group at Gulshan in the city on Monday.
Locally assembled 4G-enabled smartphones are set to hit the market in a few months’ time after seven firms have applied to the telecom regulator to set up plants. One of the seven firms is the world’s largest smartphone maker, Samsung, which will officially announce the development of its plant in Narsingdi in a press conference in Dhaka today. The South Korean electronics giant has teamed up with local Fair Electronics for the project and will start commercial production within May, said the top official of the Bangladesh Telecommunication Regulatory Commission quoting the company’s plan. Both Samsung Bangladesh and Fair Electronics declined to comment on their plan.