Lending rate may start to come down in 6 months: bank CEOs
Depending on deposit collection situation, the interest rate on bank loans may start to come down in six months when the reduced cash reserve ratio becomes effective, chief executives of a number of banks said on Sunday. The government and the Bangladesh Bank took a number of initiatives in an unprecedented manner in March this year with a view to cutting lending rate following pressures from bank owners. The policy relaxation to bring banks’ lending rate down to single digit to facilitate business growth includes cutting CRR to 5.5 per cent from 6.5 per cent, allowing state-owned entities deposit up to 50 per cent of their funds in private banks and non-bank financial institutions and extending time to adjust ADR till March 31, 2019.
BB eases use of ERQ for import payments
Bangladesh Bank on Sunday said the exporters would be allowed to pay the import payments of their subsidiaries or sister concerns from their export retention quota accounts. The BB issued a circular to authorised dealer branches of all banks saying that from now on an exporter would be allowed to retain export proceeds in foreign currency for a period of 30 days to settle import payments of exporters’ subsidiaries within this time subject to observance of the instructions contained in paragraph 28(A)(ii) chapter 13 of Guidelines for Foreign Exchange Transactions. The provision of the GFET instructed that ADs shall be satisfied that the fund will be used only for imports and repayment of foreign loan of the exporters or their subsidiaries or sister concerns by other ADs and the fund is unencumbered. It also said that transfer will be executed through Foreign Demand Draft to be settled through BB clearing accounts of ADs and this instruction shall not be applicable for fund transfer and receipt in the same AD.
Unchanged in FY ’17, but likely to worsen this fiscal
Bangladesh’s terms of trade (ToT) remained unchanged in the past financial year (2016-17) showing the economy avoided shock in prices in the year under review. The ToT, representing a ratio between export prices and import prices, remained the same means there was no price shock in both import and export prices. The central bank of Bangladesh showed the ToT was 87.11 index points in fiscal year 2017, exactly the same of FY 2016, as the import prices index was 237.36 and export prices index at 206.71. However, people familiar with the development told the FE that the ToT may worsen in the current financial year on the back of global inflationary pressure as it may make the import prices costlier. They however said that Bangladesh failed to capitalise the falling trends of import prices in the last financial year for lack of collective efforts in raising export prices.
Soaring import payments widen trade gap further
The country’s overall trade deficit widened further in the first eight months of the current fiscal year (FY) 2017-18 mainly due to higher import payments against lower export receipts, officials said. The deficit rose by nearly 93 per cent or $ 5.64 billion to $ 11.73 billion in the July-February period of FY 18 from $ 6.09 billion during the same period of the previous fiscal, according to the latest central bank’s statistics released on Sunday. “Higher import payment obligations, particularly for rise in fuel oils and industrial raw materials, pushed up the overall trade deficit significantly during the period under review,” a senior official of the Bangladesh Bank (BB) told the FE while explaining the main reason behind widening the trade deficit. The overall import jumped by 26.22 per cent to $ 35.82 billion in the period under review of FY 18 from $ 28.38 billion during the same period of the previous fiscal, the BB data showed.
Subsidiaries also can keep export proceeds in forex
The subsidiaries or sister concerns of exporters also will, from now on, be able to retain export proceeds in foreign currency for a period of 30 days to settle their import payments due within the time. The Bangladesh Bank (BB) issued a circular to this effect on Sunday. “To bring further ease in utilisation of the fund retained for 30 days, it has been decided that unencumbered balances held in the pool shall, at the request of exporters within the stipulated time, be useable to meet import payments of exporters’ subsidiaries/sister concerns,” said the BB circular. Earlier, the exporters were allowed to avail such a facility under the Guidelines for Foreign Exchange Transactions (GFET) 2018, Vol-1.
Current account deficit hits fresh record at $6.32b
Deficit in the country’s current account increased to $6.32 billion in the first eight months of the current fiscal year 2017-2018 setting a fresh record due to sharp increase in import payments against moderate growths in export earnings and remittance inflow. On the other hand, the country’s trade deficit also hit all time high of $ 11.732 billion in July-February of FY 18, rising by 92.67 per cent from $ 6.089 billion in the same period in the fiscal year 2016-17. The current account deficit in July-February of the last fiscal year 2016-2017was $963 million while the previous highest deficit was recorded in FY2010-2011 with $1.68 billion. The annual current account balance — the gap between export receipts and net earnings, including remittances, and import payments and profit repatriation by multinational companies and local people — turned negative in FY16-17 with $1.48 billion after registering its all-time high surplus at $4.26 billion in the previous fiscal year of 2015-16. Current account deficit was $ 5.347 billion in July-January of the year 2017-2018. Bangladesh Bank in the monetary policy for the second half of the fiscal 2017-18 planned to limit current account deficit within $ 4.7 billion.
Saving private banks
The governmental policy support given to the private commercial banks facing a liquidity crunch was a mere temporary solution to the crisis, as those involved in the sector (owners and bankers) have to adopt a sustainable plan in order to avoid such problems in the future. Economists, bankers, experts, and policymakers say the government has given all-out support to save the sector, and that now those concerned with the sector need to work for its revival by making the best use of government policies. Private banks in Bangladesh have been facing a severe liquidity crisis since the beginning of this year, which is affecting the country’s businesses. Due to the crisis, interest rates on bank loans went above 10%, affecting the country’s industrial growth by making it more difficult to take a loan. Following the crisis, the central bank and the government have come up with a series of bailout policies to save private banks.
Banks donate Tk 163cr to PM’s relief fund
The Bangladesh Association of Banks, a forum of private banks’ directors, has donated Tk 163 crore to the Prime Minister’s Relief and Welfare Fund. The chairmen and managing directors of all private banks handed over cheques separately to Prime Minister Sheikh Hasina at an event on Friday, according to chief executives of a number of banks.
Prime Bank plans to double its retail, SME financing by 2021
Prime Bank Limited (PBL) has planned to double its financing in retail as well as small and medium enterprises (SMEs) sectors for minimising risks and diversifying portfolios by 2021. Under the new plans, the investment in retail and SMEs would reach 40 per cent of its total loans and advances within the next four years from the existing level of 20 per cent. “We’ll double our investment in retail and SMEs as part of our vision for 2021,” Rahel Ahmed, managing director (MD) and chief executive officer (CEO) of the PBL, told The FE in an exclusive interview recently. After taking responsibility of the bank just four months ago on December 14 last year, Mr Ahmed shared the plan ahead of the bank’s 23rd anniversary to boost the financial health of the leading private commercial bank (PCB).
MTB launches student banking services: Banks ‘must lower interest rates to borrowers’
An eminent banker of the country ruled out Sunday any liquidity crisis in banks, saying the problem lies with the distribution of fund. Managing director of Mutual Trust Bank Ltd (MTB) Anis A. Khan said the banks must offer lower interest rates to borrowers by introducing special products for savings as 75 per cent funds are stuck up in public banks. The MTB CEO expressed his hope that the cash reserve ratio (CRR) circular effective from Sunday would ease the money market pressure and help contribute towards reducing the interest rates. His comments came during the launch of the MTB Student Banking services at the Samson H. Chowdhury Auditorium of the MTB Tower in the city.
Bangladesh needs new drivers of growth: Asian Development Bank (ADB)
Contributions of exports and remittances to the economy, the two traditional growth drivers of Bangladesh, have weakened in recent years. Making the observation, Asian Development Bank (ADB) stressed on the needs of seeking new drivers of growth in near future. It pointed out the export-GDP ratio declined below 15% in the current year which was around 20% five years back. In a similar vein, remittance-GDP ratio came down to around 5%, which was around 10% in 2013. ADB viewed that promoting labor-intensive manufacturing in general would help the industry to expand and meet growing demand in the domestic market. It also pointed out that Bangladesh has good potential in several industries like leather and footwear, light engineering, electronics, pharmaceuticals, furniture, shipbuilding, jute products, food processing, automobiles, and rubber goods.
Directors’ disregard: Small investors suffer as 219 directors of listed companies flout rules of shareholding
Some 219 directors of 78 listed companies have failed to hold the requisite minimum 2 percent shares of their companies and yet no actions were taken against them in the last seven years. With a view to enhancing the directors’ commitment towards the companies, the Bangladesh Securities and Exchange Commission in 2011 instructed them to hold at least 2 percent shares of the companies’ paid-up capital. The independent directors were spared from the directive. Though the 219 directors are not following the directive, the BSEC did not remove them from their boards. Most of the companies where the directors do not have the requisite shareholding are performing below par or incurring losses, ultimately affecting small investors, a BSEC official said.
NBR receives Tk 3.88b arrear income tax
Field-level income tax and Value Added Tax (VAT) offices across the country observed ‘Halkhata’ festival on Sunday, and realised a significant amount of arrear tax from the taxpayers. According to a provisional figure, the National Board of Revenue (NBR) received Tk 3.88 billion arrear income tax on the occasion. Large Taxpayers Unit (LTU) under VAT Wing received Tk 31.3 million tax from four large corporate houses – Aristopharma, Dhaka Tobacco, Renata and Transcom. LTU fetched a total of Tk 344.8 million income tax. Dhaka (East) Customs, Excise and VAT Commissionarate received Tk 58.2 million VAT on Sunday. Officials said the final data of revenue collection during the festival will be made available today (Monday).
PM gives nod to $2.67b Chinese loan
All the formalities have been completed to get the highest amount of loan worth US$ 2.67 billion from China for Padma rail link project with the Prime Minister’s seal of approval on Sunday. Sources said Prime Minister Sheikh Hasina approved the summary of the Chinese loan before she left the country for Kingdom of Saudi Arabia (KSA) and United Kingdom (UK). She also directed the Economic Relations Division (ERD) to finalise the date for signing a deal in this regard. The Chinese President’s approval to provide the loan under preferential buyer’s credit was received in February. “All the formalities are now over. Now we have to confirm the date and the place of signing the loan agreement on the Bangladesh Railway’s important project,” said a senior official. He said a Chinese EXIM Bank delegation which held a meeting with ERD and Bangladesh Railway (BR) on Thursday last proposed signing the loan agreement in Beijing at the end of this month.
Construction sector to witness double digit growth
Construction sector of the country is set to post double digit growth in the current fiscal year, FY18. Provisional estimation of the Bangladesh Bureau of Statistics (BBS) showed that the sector is set to post 10.11% growth in FY18, which was 8.77% in the previous fiscal year. The sector’s share in the Gross Domestic Product (GDP) is also estimated to increase to 7.53% in the current fiscal, which was 7.36% in FY17. The value of the economic activities of the sector is estimated at BDT 737.17 billion for FY18. Meanwhile, the latest labor force survey showed that some 3.43 million workers are now employed in this sector.
BPO Summit 2018: Outsourcing firms eye 1 lakh jobs in 3 yrs
Bangladeshi young executives sitting in their Dhaka office respond to customer-support calls made to Malaysia’s Digi, a sister concern of Telenor, and provide users of the foreign carrier solutions to problems. Genex Infosys is now running Digi Telecommunications Call Centre, which was previously managed by a Pakistani company. It also serves Grameenphone and Telenor’s concerns in different countries, including Telenor Myanmar, said Prince Mojumder, co-founder and chief executive officer of the company.
Local and Global Stock Indices *
|Index Name||Close Value||Value Change||Percentage Change|
World Commodities *
|Commodity||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)||$ 66.81||↓0.58||↓0.86%|
|Crude Oil (Brent)||$ 71.84||↓0.74||↓1.02%|
|Gold Spot||$ 1,344.59||↓1.61||↓0.12%|
Major Currencies Exchange Rates Movement in Last Seven Days *
|USD 1||BDT 83.54|
|GBP 1||BDT 119.10|
|EUR 1||BDT 103.05|
|INR 1||BDT 1.28|
*CURRENCIES AND COMMODITIES ARE TAKEN FROM BLOOMBERG.