Banks’ lending to private borrowers grew a robust 16.56 percent last fiscal year, according to central bank data released yesterday. The growth rate was the highest in four years and well above the target of 14.8 percent set in the monetary policy, thanks to declining interest rates and rising demand for short-term and consumer loans, according to bankers. “Big corporate groups are taking short-term loans to expand their operations. Borrowers are cashing in on the lower interest rates,” said Anis A Khan, managing director of Mutual Trust Bank and chairman of the Association of Bankers Bangladesh. Loans are now being given to diversified sectors, such as small and medium enterprises, consumer, personal, garment and textile, said Khan, hoping that if the trend sustains, credit growth will improve in the coming months.
Bangladesh Bank to bar banks from issuing guarantees
The central bank is set to bar banks from giving guarantee for commercial papers (CPs) to avert possible risks involving such money-market hotcakes. Officials said the Bangladesh Bank (BB) is preparing to put such restrictions by issuing guidelines on the CP shortly as a safeguard against risks the banks may get in. However, the commercial banks may be allowed to invest in the CPs for enhancing credits to CP-issuers by acting as an issuing and paying agent (IPA). IPA means a bank that delivers CPs to the investors against the proof of payment and at maturity repays the investors after receiving funds from the issuer. The central bank has decided that the banks should not issue the CP in any form or provide any guarantee for the short-term securities, according to the BB official. Non-banking financial institutions (NBFIs) are now allowed to issue CP for meeting their liquidity requirements, he explained. The NBFIs are not currently allowed to receive demand deposit like the banks and are not permitted to receive term deposits of less than three months.
Three non-bank financial institutions’ reckless lending has pushed up the overall industry’s nonperforming loans. The NBFIs are: First Finance, BIFC and People’s Leasing and Financial Services. If Reliance Finance is included, the situation will get even worse, according to industry insiders. The Bangladesh Bank in its recently launched financial stability report also focused on the issue. The sector’s non-performing loans compared to total loans rose 3.6 percentage points year-on-year to 8.9 percent in 2015. The high non-performing asset ratio of the industry is attributed to the high level of non-performing assets of three NBFIs, according to the report. As part of intensive monitoring, the BB assigned observers to the institutions and instructed them to reconstruct their boards, it added. Also, the three NBFIs’ inability to maintain the required loan loss provision is making it seem that the entire industry has failed to meet the regulatory requirement. In 2015, loan loss provision amounting to Tk 1,420 crore was maintained by NBFIs against the requirement of Tk 1,980 crore.
Ms.Rowshan Ara Begum, Joint Secretary of Local Government Division, Ministry of Local Government, Rural Development & Co-operatives and Project Director of `Strengthening Women’s Ability for Productive New Opportunities (SWAPNO)’ and Mr. Adil Raihan, Head of Channel Banking Division of Bank Asia signed an agreement at Local Government Division, DPHE Bhaban at Kakrail in Dhaka recently with an aim to facilitate social payments to SWAPNO beneficiaries across the country through e-payment system of Agent Banking channels run by Bank Asia.Mr. Hamidul Haque Khan, National Project Manager, Mr. Belayet Hossain, M&E Specialist and Ms. Selina Choudhury of SWAPNO project financed by United Nations Development Programme and Mr. Md. Moniruzzaman Khan, AVP, Mr. Md. Saifur Rahman, AVP and Mr. Md. Zakir Hossain Bhuiyain, FAVP of Bank Asia were present, according to a statement.
Export earnings in July crashed to the lowest in nine months, hurt by a slowdown in garment shipments, after registering a record high in the previous month. Overseas shipments raked in $2.53 billion last month, down 3.8 percent year-on-year, according to data from the Export Promotion Bureau. July’s receipts also missed the monthly target by 25.18 percent. “Garment exports witnessed a slowdown due to long-term holidays for Ramadan and Eid,” said Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association. Garment shipments brought home $2.11 billion in July, down 4.41 percent year-on-year.
Bangladesh’s overall imports grew 5.45 percent year-on-year in fiscal 2015-16 owing to an uptick in capital machinery and industrial raw material deliveries. The country’s imports — on a cost and freight basis — stood at $42.92 billion, according to data from Bangladesh Bank. Import costs include the value of merchandise, freight, insurance, transport, travel, royalties and licence fees. Overall, imports recorded a positive growth rate last fiscal year despite falling commodity and petroleum products prices in the international markets. The import of petroleum products based on the settlement of letters of credit dropped 29.48 percent to $2.44 billion in fiscal 2015-16.
Trade deficit falls to USD 6.3 billion in FY16 amid dull imports
The country’s trade deficit decreased to USD 6.3 billion in the recently concluded fiscal year 2015-16 compared with that of USD 7.0 billion in the FY15 amid a fall in import payments against higher export earnings. The export earnings registered an 8.9% growth in the FY16 compared with a 3.1% growth in the FY15, according to provisional data of Bangladesh Bank. The export earnings stood at USD 33.4 billion in the FY16 while it was USD 30.7 billion in the FY15.The imports registered a 5.5% growth in the FY16 compared with 3.0% growth in the FY15. The import payments stood at USD 39.7 billion in the FY16 while they were USD 37.7 billion in the FY15. The BB data earlier showed that the provisional trade deficit stood at USD9.91 billion in the FY15, but the central bank later revised significantly the data as it (trade deficit) stood at USD 7.0 billion. The central bank has mainly changed the import figure for the FY15 as the revised data decreased to USD 37.7 billion from the provisional data of USD 40.7 billion.
The amount of deposits in the bank accounts owned by school students in the country decreased to Tk 827.76 crore as of March 31, 2016 from that of Tk 844.19 crore as of December 31, 2015. BB official told New Age on Thursday that the deposit amount in the school banking accounts declined in the first quarter (January-March) of this year as banks had recently not given much attention to the financial inclusion programme targeting school children. Under the programme, students below the age of 18 are allowed to open bank accounts by keeping a minimum balance ranging between Tk 100 and Tk 500. he amount of deposits in the bank accounts opened by school students was Tk 764.99 crore as of September 30, Tk 687.99 crore as of June 30, Tk 823.04 crore as of March 31 in 2015 and Tk 714.49 crore as of December 31, 2014. The BB data, however, showed that the number of schoolchildren bank accounts increased to 10.66 lakh as of March 31, 2016 from that of 10.34 lakh as of December 31, 2015.
Mutual funds likely to get respite from new VAT burden
All the mutual funds are likely to get respite from an additional 15 per cent value-added tax burden on different fees that the entities submit under securities rules, said Bangladesh Securities and Exchange Commission officials. The issue of submitting 15 per cent VAT by MFs came to light in April 2016, when the National Board of Revenue issued a letter in this regard. The NBR letter also asked to deposit VAT at 15 per cent rate since the year 2010 which was applicable on annual fees. The NBR letter was issued under the guideline of Section 19 E of Value-Added Tax Rule-1991. The commission, however, observed that a number of institutions including stock exchanges and equities are exempted from such taxation under a provision of Value Added Tax Act, 1991. Following the NBR letter and based on the findings of the commission, BSEC in May this year issued a letter to the NBR so that the VAT on the MFs’ different fees is not deducted. The revenue board, however, is yet to give any reply in this regard, BSEC officials said. As the NBR is yet to clarify, majority of the mutual funds have kept a substantial amount as liability in their financial statement for the year ended on June 30, 2016, for the 15 per cent VAT which will ultimately affect the MFs’ dividend payment capacity and subsequently cause distortion in investors’ confidence as well, they said.
The Prime Minister’s Office (PMO) has asked the finance ministry to take necessary steps for framing a law and policies on recovery of default loans in the country’s banking sector, officials said. As part of the move, an unofficial note signed by Dr Mashiur Rahman, Economic Affairs Adviser to the Prime Minister (PM), was sent to the finance ministry, they added. The finance ministry will inform the PM about it after working on its, they also said. In September last year a meeting organized by the Bank and Financial Institutions Division (BFID) under the finance ministry took a decision to appoint private agents to recover bad loans. But the authority did not proceed further with the decision for reasons unknown, sources concerned said. The People’s Development Services Corporation Ltd (PDSCL) has sought cooperation from the PM to frame a law, namely private agent company act-2015, on recovery of non-performing loans (NPLs).
Bank rate, bureaucratic tangles obstruct local private investment in power generation projects
Experts and business leaders on Saturday said high rate of interest on bank loans and bureaucratic tangles in the project approval process were the major obstacles to private investment in mega power-generation projects. They said that the need for USD18.0-USD20.0 billion bank loans in the next 13 years to increase the country’s power generation capacity to 39,000MW was solely dependent on foreign sources as the local financial institutions were not ready to finance billion-dollar projects. Double digit interest rate on bank loans, inadequate grace period in repayment scheme and lengthy process in providing land and legal vetting are not suitable for local entrepreneurs to invest in mega power-generation projects — 300MW power projects or above, the experts said.
NBR sets lower corporate tax target as PCBs’ profits shrink
The tax authority has set a lower corporate tax collection target for the current fiscal year, compared to that of the last year, in view of the last year’s slim growth of operating profit of the private commercial banks (PCBs). The revenue board for the first time set a target, lower by BDT 19.9 billion over that of the previous fiscal, for the Large Taxpayers Unit (LTU) under the income tax wing. The National Board of Revenue (NBR) fixed BDT 178.0 billion income tax collection target for the unit for fiscal year 2016-17. The income tax collection target was BDT 197.8 for 2015-16. Commercial banks contribute around 60% of the corporate tax collection of the LTU. According to statistics available with the NBR, the LTU experienced a significant shortfall in revenue collection target for the last fiscal year. The unit collected BDT 146 billion income tax last year, missing its target by BDT 51 billion.
Country’s petroleum import bill fell drastically by nearly USD 1.2 billion to over USD 2.0 billion in eleven months to last May as prices tumbled on the international market on supply glut, according to central bank statistics. The statistics prepared based on the opening of letters of credit (LCs) revealed that such fall was nearly by USD 1.0 billion in terms of LC settlements. The LCs opened for import of crude oil stood at USD 362.9 million in July-May period against USD 618.7 million in the same equivalent period previously. The LC opening for refined oil import accounted for USD 1.7 billion in the period under review. It was USD 2.6 billion in July-May 2015. Oil prices that had averaged more than USD 100 a barrel since 2010 went on a dive in June 2014 and it now stood on average at USD 43 a barrel. However, people at the Bangladesh Petroleum Corporation (BPC) said the reduction in import bill has been mainly due to the decline in fuel prices on the international market.
KSA lifts ban on recruitment of Bangladeshi workers
The Saudi government has lifted its ban on recruitment of Bangladeshi workers, paving the way for sending all categories of workers to the gulf country after six years. The ban which was in force for the past six years excluded Bangladeshi domestic helps. Bangladesh Ambassador to Saudi Arabia Golam Moshi told Arab News that this is good news for all prospective workers from the country. The envoy recalled that opening the recruitment channels from Bangladesh is subsequent to a meeting between King Salman and Prime Minister Sheikh Hasina in June last. He said the new decision would pave the way for all categories of Bangladeshi workers which include skilled, unskilled, professionals such as doctors, nurses, teachers, farm and construction workers. Currently, there are 1.3 million Bangladeshis working in the Kingdom and about 60,000 of them are female domestic helps.
US to continue, ramp up apparel sourcing: Envoy tells BGMEA leaders
As the single largest importer of Bangladeshi made apparel products, the US will continue and increase sourcing from Bangladesh, US Ambassador Marcia Stephens Bloom Bernicat said Thursday. She also expressed the hope her government would support other investments in areas such as LNG and pharmaceuticals. She was addressing a press conference after a meeting with the leaders of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) at the association’s headquarters in the city. BGMEA president Md Siddiqur Rahman and vice presidents Faruque Hassan, Mahmud Hassan Khan and Mohammed Nasir, among others, were present. Ms Bernicat said that her country wants to find more and more business opportunities that would help both Bangladesh and US consumers. Regarding the post-terror attacks in the country, she said everybody is concerned about safety and security question in Bangladesh. The US remains a partner of Bangladesh and will remain so for fighting terrorism, she mentioned.
A total halt to household gas supply soon: Finance Minister
The government will go for entirely stopping household consumption of natural gas in the near future, Finance Minister A M A Muhith said Saturday as he sees cooking with it as sheer waste of a wealth. Instead, Mr Muhith said, the government is promoting the use of Liquefied Petroleum Gas as an alternative at the household level. His remarks came at a time when the government is devising various strategies for reducing household gas consumption in the country. Already, the government has stopped providing any new gas connection to households. The finance minister said, “Going forward, minimizing the household consumption of natural gas is our first priority in the energy sector for the coming years.” Mr Muhith in his speech also called for increasing the use of Liquefied Natural Gas (LNG) in the fuel mix. “Keeping that in mind, the government has already moved to set up country’s first LNG terminal in Cox’s Bazar while we are also pondering over constructing a second LNG terminal to accelerate the import of LNG.” He also stressed intense exploration of the country’s maritime territory for potential energy resources.
Bangladesh Shipping Corporation (BSC) braces itself with massive preparatory work including purchase of 16 ships for transport of coal to the Rampal power plant to facilitate implementation of the project adjacent to the Sunderbans. The state-owned corporation informed the parliamentary standing committee on shipping ministry Thursday about its present situation, plans and other development activities. Earlier, the Jatiya Sangsad (JS) body on the power ministry had made their recommendation that the coal-guzzling power plant would do no harm to the world’s largest mangrove forest, Sunderbans, dispelling fears aired by environment activists. The parliamentarians on the panel held the view that the gigantic power project would rather create employment for 50,000 local people who are presently engaged in various activities detrimental to the sprawling forests along the coast of the Bay of Bengal. The corporation said every month about 450,000 tonnes of coal would be required to feed the proposed 1320-megawatt (MW) Rampal Power Plant, yielding the government shipping lines huge freight-transportation job. A memorandum of understanding (MoU) has already been signed between the BSC and the Bangladesh-India Friendship Power Company Ltd (BIFPCL) on carrying coal and the agreement-signing process is underway.
Bangladeshis are very optimistic about their outlook on the economy, employment prospects and the quality of life in the second half of 2016, according to a MasterCard survey. The country recorded a gain of 4.3 points to stand at 71.6 points in MasterCard’s Index of Consumer Confidence. It stood at 67.3 points in the second half of last year. Syed Mohammad Kamal, country manager of MasterCard, and Gitanka Datta, vice-president of the company, unveiled the results of the survey yesterday at the capital’s Sonargaon hotel. By and large, consumer confidence in the Asia-Pacific region has been steady, with nine out of the 17 markets surveyed showing stability.
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