Bangladesh Bank spurs banks to speed up loan recovery
Bangladesh Bank on Tuesday asked scheduled banks to take initiative to reduce their defaulted loans by speeding up their loan recovery process. The direction came from a meeting between the central bank and schedules banks at the BB headquarters in the capital. BB governor Fazle Kabir presided over the meeting while senior officials of the central bank and managing directors of the commercials banks were present. According to a meeting source, Kabir asked the banks to take all types of initiative to recover the non-performing loans in the shortest possible time. The BB data showed that the non-performing loans in the banking sector increased by BDT 80.4 billion to BDT 594.1 billion in the first three months of 2016 as the central bank had recently unearthed a number of scams in different banks that raised the amount of overall defaulted loans. The BB governor said that the country’s private sector credit growth had recently increased which was a good sign. But the banks have to give special attention on fresh lendings so that they will not plunge in the defaulted zone. BB deputy governor SK Sur Chowdhury after the meeting told reporters that the central bank asked the banks not to go for aggressive lending by ensuring qualitative loan disbursement. He said that the central bank asked the banks, whose capital market exposure was still high considering their capital position, to apply to the BB to get policy support to streamline their exposure without selling shares.
Banks asked not to lend aggressively
Bangladesh Bank has asked the banks not to lend aggressively as consumer lending is on the rise which will pose risk for the banks. The instruction came at a bankers’ meeting Bangladesh Bank hosted with top managers of all commercial banks yesterday at its headquarters. This was the first bankers’ meeting since the governor, Fazle Kabir, took the helm of Bangladesh Bank in March. The governor presided over the meeting which was also attended by the central bank top officials, among others. Top managers are happy with the recent trend of credit growth after it remained sluggish over the last two years, he said. He said credit is mainly flowing to retail clients, consumer sector and RMG sector. Though Bangladesh Bank discourages consumer loans, its current stand is somewhat positive to accelerate credit growth at this moment, said the BB official. He suggested ensuring quality loans to avoid loan rescheduling since the consumer loan is risky for banks. Banks are still facing lack of power and energy supply which hinders credit growth, Sur said, quoting top managers of the banks at the meeting. The private sector credit growth rose to 15.2% as of March against monetary ceiling of 14.1%, while the growth was 13.6% in the same period last year, according to the central bank data. Lower lending rate and political stability were accounted for higher credit growth, Bangladesh Bank stated its monetary review report. According to the amended bank company act, the capital market exposure of banks will be 25.0% of their capital by July 21, 2016.
Appellate Division upholds regulator’s order on MFs’ tenure
The Appellate Division on Tuesday upheld a Bangladesh Securities and Exchange Commission directive on setting the tenure of closed-end mutual funds for highest ten years. The appellate division bench led by chief justice Surendra Kumar Sinha passed the order following a BSEC plea against a High Court order. The appellate division in its verdict set aside the HC verdict meaning that the BSEC directive on setting the tenure of closed-ended mutual funds to ten years will prevail, attorney general Mahbubey Alam told reporters on Tuesday. As per the order, the tenure of the closed-end mutual funds will not exceed 10 years, he said. He said the AD delivered the verdict in favour of liquidation or conversion as per unit holders’ decision. BSEC executive director Saifur Rahman told New Age, ‘The Appellate Division has upheld the commission’s appeal against a HC order.’ The commission will take its next course of action after getting certified copy of the verdict, he said. On December 15, 2015 the HC had declared the BSEC directive notified in a gazette on January 24, 2010 illegal based on a writ petition filed by Md Ali Zaman, an investor.
SME, agriculture hold highest percentages of classified credits
Country’s small and cottage industries and agriculture hold the highest percentages of their snowballing classified loans from banks, leaving policymakers on banking in a quagmire. The disclosure on the indebtedness of the two pivotal fields of the national economy with loads of bad loans came in a keynote paper on credit risks of banks at a seminar. Some of the speakers at the meet also aired the fear that defaults on part of big borrowers might cause major onslaught on the country’s banking sector. According to the policy paper, presented at a seminar at the Bangladesh Institute of Bank Management (BIBM) Tuesday, about 18.7% of the outstanding loans disbursed to small and cottage industries became classified. The share of unpaid bank money is about 14.3% in case of the agricultural sector. The speakers at the seminar on ‘Handling Credit Risk of Banks in Bangladesh: Demand, Supply and Regulatory Perspective’ expressed their concern over the rising trend in classified loans in these sectors as the government is trying to promote these sectors in order to ensure a sustainable growth in the country. BIBM director (Training) Professor Dr Shah Md. Ahsan Habib, who presented the paper, also showed the ratio of bad loans to total classified loans also increased to 84.6% in 2015 from 77.8% in 2014. Habib. Substandard and doubtful loans constituted about 8.9% and 6.5% respectively. Banks are required to maintain certain amount of their pre-tax profit in the form of provision against the classified loans. The cumulative provisions amounted to BDT 266.1 billion at the end of 2015, as against the requisite provisioning of BDT 308.9 billion. The amount was BDT 281.6 billion at the end of 2014 as against BDT 289.6 billion. The speakers, mostly bankers from various financial institutions, vented their concern over a rising trend in the provisioning shortfall, which, they feared, would eventually weaken the financial stability of the banking sector.
DSE, CSE cut trading time during Ramadan
The Dhaka Stock Exchange (DSE) has decided to curtail the trading time by half an hour during the holy month of Ramadan, officials said. As per the decision of the DSE board of directors, trading at the DSE will begin at 10:30am as usual and will continue till 2:00pm instead of 2:30pm, three and a half hours instead of regular four hours trading, the stock exchange said in a statement on Tuesday. The premier bourse also changed its office timing to cope with the Ramadan. The official activities of DSE will remain open from 9:30am as usual and will continue till 4:00pm instead of 5:30pm during Ramadan, said the statement. Usually, trading takes place between 10:30am and 2:30pm while DSE office remains open from 9:30am to 5:30pm in every working day. After Ramadan and Eid vacation, DSE trading and office hours will come to regular time, the statement added.
Budget deficit to soar by 13.0%
The budget deficit in next fiscal year is going to rise by 13.0% or BDT 112.8 billion from the current fiscal’s figure due to increase in expenditures on development programs and salaries and allowances of the government employees. According to final budget outlay obtained by the Dhaka Tribune, the deficit is likely to stand at BDT 978.5 billion in the FY 2016-17 from BDT 866.6 billion in the current fiscal year. However, in comparison with the budget size, the deficit has fallen to 28.73% from 29.33% of the current fiscal year. The total budget outlay will be BDT 3.4 trillion in the next financial year, compared to BDT 2.96 trillion in the outgoing fiscal year. Finance Minister AMA Muhith will announce budget for the FY 2016-17 in the Parliament tomorrow with a GDP forecast of 7.2% and projected inflation rate of 5.8%. In a recent interview with Dhaka Tribune, finance minister said the budget deficit in the upcoming fiscal could be around BDT 1.0 trillion. He said the government has prepared the budget giving major focus on growth, development and equal distribution of growth, and this will be in line with the goal of achieving middle income status economy. Infrastructure sector will get the highest allocation in the next budget, followed by education and health sectors, Muhith said.
Businesses demand cuts in corporate taxes
Business leaders are expecting a budget that would reduce corporate tax, as the cost of doing business is on the rise. They also said the government should take up schemes to spur expansion of local industries and create more employment opportunities. Abdul Matlub Ahmad, president of the Federation of Bangladesh Chambers of Commerce and Industry, called for bringing down corporate tax for export industries, especially for garment and textile, to 18.0% from 35.0% now. “I expect the government will put stress on the expansion of local industries and the utilization of the expanded domestic market,” Ahmad said. He also demanded reduction in the number of slabs in supplementary tax and hopes that the infant local industries will not face competition from finished imported products. The VAT and tax nets need to be widened in order to get higher revenues, Ahmad added. The Foreign Investors’ Chamber of Commerce and Industry, a trade body of overseas investors in Bangladesh, suggested corporate tax should be brought down by 10.0-15.0%. FICCI also demanded increasing the minimum taxable income ceiling to BDT 300,000 from existing BDT 250,000.
Bangladesh Economic Association proposes over BDT 8.08 trillion shadow budget
The Bangladesh Economic Association (BEA) has proposed an alternative budget involving an outlay of over BDT 8.08 trillion for the fiscal year 2016-17 (FY 17), which is more than double the upcoming national budget and 3.87 times the national budget for the FY 2015-16, reports BSS. Unveiling the budget at a press conference at the BEA auditorium in the city, former BEA President Abul Barkat said, “We have proposed the alternative budget to build the country in the spirit of the Liberation War.” He said the revenue receipts for the FY 17 had been estimated at BDT 6.4 trillion, of which BDT 4.78 trillion would come through the National Board of Revenue (NBR). He said the overall budget deficit has been estimated at BDT 1.70 trillion, which is 20.0% of the total proposed budget. Of the amount, BDT 550.0 billion would come from the Public Private Partnership, Abul Barkat added.
http://newagebd.net/232917/bea-proposes-BDT -808142cr-budget-for-FY 2016-17/
Safety net outlay to go up 16.0%
The allocation for safety net programs is set to rise about 16% year-on-year to BDT 435.0 billion in the upcoming budget. As percentage of gross domestic product, the allocation for fiscal 2016-17 is not much of an improvement over the current year’s: it will stand at 2.22% of GDP in contrast to 2.19% this year. Given the recent fall in fuel prices, economists said the allocation for the 140 safety net programs under the development and non-development budgets should have been raised more. The government last year prepared a national social security strategy to bring all vulnerable citizens under the social safety net. The plan did not materialize due to a fund crunch, said a finance ministry official. “But, it will be implemented gradually,” he added. However, in fiscal 2016-17, there will be various cash transfer programs including allowance for the elderly and physically challenged people. At present, BDT 53.6 billion has been allocated for 18 programs under the social safety net scheme, which will be increased by more than BDT 10.0 billion in the upcoming fiscal year, said an official of the social welfare ministry. Of the schemes, the biggest one is for the elderly, and the number of beneficiaries will increase 5.0% or by 150,000 in the next budget. At present, the total number of beneficiaries for old-age allowance is 3.0 million. Each beneficiary gets BDT 400.0 per month, and from next fiscal year it will be BDT 500.0.
AIIB to fund over BDT 7.0 billion for rural electrification project
Bangladesh will receive a loan of over BDT 7.7 billion from the China-led Asian Infrastructure Investment Bank (AIIB) this year for rural electrification project. The funding from the newly created lender is the second in kind following a loan of BDT 5.17 billion approved by the Ecnec last week for two power distribution projects this month. The total project cost is over BDT 12.3 billion approved at a meeting of the Executive Committee of the National Economic Council (Ecnec) in Dhaka yesterday. Of the total cost, the government will provide BDT 4.6 billion from the public coffer. The project was taken in line with the Bangladesh government Vision-2021 to bring all villages in the country under electricity coverage to upgrade the life-standard of rural people. Currently, some 70.0% people are getting electricity connection. The multilateral investment bank, which has an authorized capital of USD 100.0 billion, is expected to lend USD 10.0 billion to USD 15.0 billion a year for the first five or six years started operation in January 2016. “Bangladesh is likely to place the Ecnec-approved projects at a meeting with the bank’s board of directors scheduled next month,” said an official of the Planning Ministry. Under the project, Bangladesh Rural Electrification Board (BREB) under the Power Division of the Ministry of Power, Energy and Mineral Resources will implement the rural electrification project by June 2018. The project will be implemented through 77 Palli Bidyut Samities under the BREB. According to Planning Minister AHM Mustafa Kamal, there are some 21.5 million households with power connections across the country. Of them, some 15.0 million power connections are under the BREB till March, 2016, he said. A planning commission official said the BREB has recently conducted an in-house feasibility study, the findings of which show that it is possible to provide power connections for some 25 lakh more clients through changing transformers without setting up any new line within the coverage of BREB.
Government seeks USD 100.0 million from World Bank for climate-resilient enterprises
The government has sought USD 100.0 million from the World Bank (WB) to develop climate-resilient enterprises to ensure sustainable livelihoods for the vulnerable community, officials said. The Economic Relations Division (ERD) in a recent letter made the request to finance the ‘Climate Resilient Enterprise Development Project’ to be implemented by the Palli Karma-Sahayak Foundation (PKSF). Of the total sum, USD 50.0 million has been sought as grant while the rest USD 50.0 million as soft loan. The five-year long project has been targeted on the poor and ultra-poor communities living in four climate hotspots — flood, flash flood, drought and salinity-prone areas. The project to be operated in some 40 upazilas of 20 climate change vulnerable districts will benefit some 0.1 million people. Of the total amount, USD 50.0 million will be spent to develop climate-resilient initiatives and the rest USD 50.0 million will be provided to people as micro-credit for starting business. The main objective of the project is to ensure sustainable livelihoods in climate vulnerable areas through technology innovation, transfer and value chain development. It also aims to ensure inclusive financing for development of enterprises based on climate resilient production systems in the targeted communities. A concept paper of the project, jointly prepared by the PKSF and the World Bank, said the project will primarily focus on adaptation but will take some measures to address both adaptation and mitigation.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$48.87||(0.23)||(0.47%)|
|Crude Oil (Brent)*||$49.63||(0.26)||(0.52%)|
|Dow Jones Industrial Average||17,787.20||(86.02)||(0.48%)|
|USD 1||BDT 78.36*|
|GBP 1||BDT 113.50*|
|EUR 1||BDT 87.12*|
|INR 1||BDT 1.17*|
*Currencies and Commodities are taken from Bloomberg.