Lenders are locked in a stiff competition to bag clients with good track record, according to industry players. If a lender offers a borrower a loan at 9% interest rate, another bids to hook the client at 8.5%. Even then, the second lender may not get the client because a foreign bank will grab the customer giving a much lower rate. Ali Reza Iftekhar, managing director of Eastern Bank, said his bank has given loans even at 8.0% to clients who have a very good track record. Banks compete not only with each other but also with a variety of other financial service providers, including non-bank finance and leasing companies. Of the lenders, 57 are banks and 33 are non-bank financial institutions. The nine fourth generation new banks and NBFIs are facing further challenges as the cost of their funds is relatively higher than their peers. Bangladesh Bank data also shows that the interest rates, both for lending and deposits, are falling for the past few years because of poor demand for money in the market. The weighted average lending rate of all banks has come down to 10.39% at the end of June, down from 11.05% in January this year. The rate was 11.67% in June last year.
With BDT 80.8 billion surplus, government squeezes T-bill, bond sales
Rates of interest on the government treasury bills and bonds decreased sharply in recent months due to a lower demand for borrowing through the instruments from the government which is now facing a surplus amount of BDT 80.8 billion in its account. Country’s scheduled banks rushed to invest their excess liquidity in the government tools amid slow credit demand due to a sluggish business situation in the country, but they received lower rates of interest from the T-bills and bonds. A BB official told New Age on Sunday that the net government borrowing from the banking sector would remain negative in August this year as the government would repay more than the borrowing from the banks. The net repayment of the government to the banks will stand at BDT 15.0 billion in August, according to the central bank’s auction calendar. The BB data showed that rates of interest on all types of T-bills and bonds dropped in recent months as most of the banks submitted bids worth huge amount of money at the central bank’s auction for the government tools to invest their idle fund in the instruments.
Reserve money grew at twice the usual rate: Rise in bad loans, non-food inflation feared
Reserve money grew by over 30.0% to BDT 1.93 trillion in a year to June 30, widening the country’s monetary base in a way that may not bode well for the economy. Some economists make a prognosis that such disproportionate rise in the high-powered money may yield two ills: further swelling of the idle money in the economy and an increase in inflation. This unusual growth in reserve money, which usually grows at around 15.0%, was basically fuelled by an increase in net foreign assets, according to people in the central bank. A country’s net foreign assets (NFA) position is defined as the cumulative change in its current account over time, and Bangladesh’s current account now runs within the surplus domain. The NFA surged by BDT 402.25 billion or 23.46% while net domestic assets of Bangladesh Bank decreased by BDT 103.06 billion as of May 2016 against that of May 2015, they said. On the other hand, experts familiar with the financial market told the FE such growth in the reserve money got fuelled up for lack of ‘sterilization intervention’ by the central bank. They said the Bangladesh Bank failed to attract commercial banks to reverse-repo bids to tame the money boom within the range of 15-16% through the sterilization mechanism.
BRAC Bank, SME Foundation team up to provide SME loan
Selim R F Hussain, managing director and CEO of BRAC Bank and Md Safiqul Islam, managing director of SME Foundation, signed the agreement at SME Foundation Office in the capital on August 18. Under the agreement, BRAC Bank and the SME Foundation will partner to offer small business finance to Agar producers in Sujanagar union area under Borolekha Upazila, in Moulvibazar district. The agreement will be valid for four years. The entrepreneurs can avail loan ranging from Tk50,000 to Tk10 lakh without any collateral. Agar oil, Agar wood and Agar dust are primarily exported to the Middle East countries. According to SME Foundation, Agar Atar Cluster in Moulvibazar earns Tk60 crore in foreign currency a year, employs around 45,000 people in around 350 processing factories. The financing by BRAC Bank will play a catalytic role in boosting the export earnings of the Agar Atar Cluster and facilitate diversification of the country’s export basket.
Probashi Kallyan Bank paid-up capital raised to BDT 4.0 billion, to be 58th scheduled bank
The paid-up capital of state-owned Probashi Kallyan Bank has been increased to BDT 4.0 billion from BDT 1.0 billion after the government decided to graduate the bank from specialized status to a scheduled bank. The move came early this month after the bank had applied to ministry of finance and Bangladesh Bank for transforming the bank into a scheduled one through increasing its capital base. According to the Bank Company (amendment) Act, 2013, a scheduled bank is law bound to manage at least BDT 4.0 billion as its paid up capital. Launched on April 20, 2011, Probashi Kallyan Bank has been operating through 49 branches across the country with the vision to help the Bangladeshi diasporas. It was learnt that the enhanced capital was channeled to the bank from the welfare fund of the wage earners. The government created the wage earners’ welfare fund with contributions from the migrant workers while they leave Bangladesh to foreign countries with jobs.
Sponsor-directors’ 2.0% shareholding: BSEC seeks legal opinion from AG
The securities regulator has sought legal opinion in an effort to revise its directive regarding the sponsor-directors’ minimum two% shareholding portion in listed companies, the official sources said. The Bangladesh Securities and Exchange Commission (BSEC) sought the opinion from the Attorney General (AG) after submitting a proposal of revising sponsor-director’s shareholding portion to the ministry of finance (MoF). The securities regulator has proposed to set shareholding condition for sponsor-director through four slabs considering the paid-up capital of the respective listed companies. A senior BSEC official said that after the issuance of the directive regarding minimum shareholding condition, many directors having less than 2.0% shares lost their directorships. According to BSEC directive issued on November 22, 2011, each director, other than independent ones, of any listed company shall hold minimum two% shares of the paid up capital, otherwise there shall be a casual vacancy of director. And all sponsors/promoters and directors of a company shall all time jointly hold minimum 30.0% shares of the paid-up capital of the company.
BSEC asks bourses for updates on share sales to strategic investors
Bangladesh Securities and Exchange Commission has asked Dhaka and Chittagong stock exchanges to inform the market regulator what steps the bourses have taken to sell BDT 6.1 billion shares of the demutualized bourses to foreign strategic investors. The market regulator issued separate notices to the bourses in this regard on Wednesday last week. On December 9, 2015, the BSEC under the Demutualization Act, 2013 directed DSE and CSE to get strategic investors within a year meaning that the bourses have only around four months for signing agreements with strategic investors. BSEC issued the directive after two years of demutualization of the bourses. Dhaka and Chittagong stock exchanges became demutualized on November 21, 2013 as per the recommendation of capital market investigation committee on 2010-11 market crash that made thousands of investors penniless. The BSEC letters issued on August 17 to the managing directors of DSE and CSE mentioning its earlier letter of December 9 last year asked the bourses to inform the status of agreements with the strategic investors within ten working days.
The contribution of garment accessories and packaging to apparel export rose to USD 6.1 billion in the last fiscal year which is 9.3% higher compared to USD 5.6 billion in the fiscal year 2014-15. The industry people hope that the figure will be more than double to USD 12.0 billion by 2018. The backward linkage industry, however, has directly exported accessories and packaging products worth USD 610.0 million in the same period. RMG industry, the highest foreign currency earner, earned USD 28.1 billion, posting a 10.2% rise. The accessories and packaging sector is considered a strong backward linkage industry for the country’s apparel industry, the lifeline to export earnings. It saves foreign currency by providing accessories alongside helping to meet lead time.
Energy set to be dearer with expensive LNG, LPG imports: Guidelines for using ESF soon
The regulator moves to finalize guidelines for using the ‘energy security fund (ESF)’ now that energy usage is poised to be dearer with import of natural gas substitutes. Sources said the funds from the special allocation meant for energy security will help in the import of expensive LNG and LPG and building terminals. The ESF was created last year to ensure availability of future ‘expensive’ energy as the reserves of local gas are drying out, a senior BERC official told the FE. Funding the import of LNG (liquefied natural gas), the building of LNG terminal, import of liquefied petroleum gas (LPG), construction of LPG terminal and other projects related to energy security constitute the main objectives of the ESF. The fund was created in accordance with the BERC order over the hike of natural gas tariffs in September last year, when it increased the average prices of natural gas by 26.3%. As per the draft guidelines, a committee headed by the BERC chairman would finalize projects to be funded with the ESF money.
Grameenphone is set to get a new number series of ‘013’ as their existing ‘017’ prefix is almost full. The development comes after Bangladesh Telecommunication Regulatory Commission in a meeting yesterday approved Grameenphone’s request but with a few conditions, said a senior official of the regulator. Grameenphone applied for an additional number series two years back after its projected sales showed the operator could burn through its existing 017 prefix as early as November this year. Each numbering series has 100.0 million slots. The conditions for getting the new prefix are: solving its pending issues with the BTRC and informing the regulator how many slots the operator has used in its current numbering series of 017. The operator has been facing a lot of challenges for the last two years for running with so little slots in its numbering series, said Mahmud Hossain, chief corporate affairs officer of Grameenphone. As of June, Grameenphone has 56.9 million active subscribers out of the country’s total of 131.4 million. The operator has not disclosed the actual number of SIM cards it sold.
Cattle traders and market operators hope for enough supply of sacrificial animals on the occasion of upcoming Eid-ul-Azha as a good number of people have entered the business due to growing demand and handsome profits last year. Involvement of a large number of farmers and traders in cattle farming would further help reduce the country’s dependency on imported animals ahead of such biggest festival. More than 3.5 million cows have been reared for sale this year on the occasion of Eid-ul-Azha which is 40 per cent higher than that of last year, official data showed.
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