Bangladesh Bank tells lien banks: Deduct 0.03% from every RMG export order from July 01
The central bank asked the lien banks concerned on Sunday to deduct 0.03% from every readymade garment (RMG) export order from July 01 next. The Bangladesh Bank (BB), in a circular, also asked the bank authorities to transfer the deducted amount to the account namely ‘Central Fund (RMG Sector)’ within seven working days of the deduction. Earlier, the Ministry of Labor opened the aforesaid account at Ramna Corporate Branch of Sonali Bank Ltd following the fund’s first board meeting decision to deduct the amount from next month. The board was formed more than six months after the rules were published in line with a provision of the amended labor law 2013 that incorporated that sector-wise separate welfare funds would be established for the workers of the country’s export-oriented sectors. According to the labor rules that came into effect on September 15 last year, the export-oriented factories would have to contribute 0.03% of their freight on board (FoB) price to the fund while the contributions from the government and buyers would be voluntary. There will be two bank accounts for the fund — beneficiary and contingency — where the money would be deposited equally.
Central bank assessing sectoral flow of private sector credit
The central bank is scrutinizing the flow of commercial banks’ credit to different sectors and assessing its impact in the context of the country’s economic growth, officials said. This is being done under an ongoing study. The most part of the total ‘outstanding’ loans until March 2016 went to consumers financing, readymade garment (RMG) and other commercial activities, according to initial findings of the study. The total ‘outstanding’ consumer loans grew by nearly 15.0% to BDT 218.0 billion as on March 31 last from BDT 190.0 billion in the same period of the previous calendar year while the ‘outstanding’ loans of RMG sector increased by more than 15.0% to BDT 801.0 billion from BDT 696.0 billion during the same period. The total ‘outstanding’ loans for commercial purposes rose by nearly 23.0% to BDT 1090.0 billion over a period of one year from BDT 887 billion in March 2015, the BB data showed. The total ‘outstanding’ loans with the private sector rose to BDT 6364.4 billion in March 2016 from BDT 5526.7 billion in the same month of 2015. The central bank took the latest move after exceeding the private sector credit growth target set by it in its monetary policy, for the January-June period of the ongoing fiscal year. The central bank had projected that the private sector credit would grow at 14.8% in June 2016 from 13.8% in December 2015. The private sector credit growth has already reached at 15.6% in April last on a year-on-year basis from 15.2% in March, 2016. The credit growth was 15.1% in February.
Falling interest rates on deposits erode NBR’s tax receipts
Sliding interest rates on deposits have taken a toll on the National Board of Revenue’s takings from savers — a development that taxmen say might not lead to growth in collections this fiscal year. The tax authority logged in about BDT 44.0 billion as tax from interest income from bank deposits in the first ten months of the fiscal year. The amount is 72.0% of last year’s takings of BDT 60.8 billion. Tax deducted from interest earnings of savings and fixed deposits is the second biggest source of withholding tax collected by the NBR. The weighted average interest rates on deposits dropped to 5.9% in March from 7.1% a year earlier. In March 2014, it was 8.2%, according to the Bangladesh Bank. Over the last two years, sluggish demand for loans and eagerness by a section of entrepreneurs to borrow from abroad forced banks to cut lending rates and, as a result, to lower deposit rates. The lending rate came down to 10.8% in March from 13.4% a year ago, according to central bank data. The government has been collecting tax from profits or interest incomes of depositors for more than two decades now, irrespective of whether the savers have taxable incomes or not — the justification of which is questioned by many. As of April, there were 76.2 million bank accounts, 76.0% of which are savings accounts.
Bangladesh Insurance Association for withdrawal of 5.0% source tax, 15.0% VAT
Bangladesh Insurance Association (BIA) demanded exemption from 5.0% source tax on policy bonus and 15.0% VAT on commission paid by insurance agents. Policy holders are being affected while insurance business is being interrupted due to 5% source tax imposed in the Finance Bill 2014, said a press release the organization released yesterday. There is an international practice of such tax on policy bonus, added the release. The amount of policy bonus is very negligible compared to inflation, the statement said, adding that in this perspective BIA proposed the government for tax withdrawal. Moreover, agents work on behalf of insurance companies to collect business. They are paid commission against the business they collect which is called income. Insurance companies pay 5.0% source tax on the income. But the National Board of Revenue (NBR) added that commission has been added to miscellaneous services and 15.0% VAT imposed on them. BIA claimed that the imposed VAT is not logical and it contradicts the insurance act.
Refinancing scheme demanded to boost real estate sector
Realtors have demanded stimulus package and reinstatement of a single-digit refinancing scheme for the country’s housing sector to overcome crucial time gripping the real estate business. The apex body of the housing sector also demanded tax holiday for the next five years for realtors making construction within the capital and 10 years for outside the city areas. Real Estate and Hosing Association of Bangladesh (REHAB) president Alamgir Shamsul Alamin came up with the demand at a press briefing yesterday. REHAB gave a 13-point proposal to the NBR to include in the National budget 2016-17, but to no avail. The sector is going through a crucial time, and to overcome the situation, the government should take short- and long-term initiatives including forming a national committee and providing a stimulus package for the sector, Alamgir suggested. People are unwilling to invest untaxed money in the real estate sector as they have to face question by a certain organization, he said, adding that that is why, the government should relax existing rules and regulations to allow undisclosed money to invest in the real estate sector, said the business tycoon. Billions of Bangladeshi currency are being siphoned off abroad as they face questions about the source of money, Alamgir said, adding that in 2013, over Tk 760.0 billion flew from Bangladesh. For middle class and low-income group, the organization has demanded formation of a fund of any amount and introduction of a single-digit refinancing scheme by the Bangladesh Bank.
Sans banking licence, DMCBL collects BDT 9.8 billion, disburses loan
Bangladesh Bank is worried about the continued banking operation by The Dhaka Mercantile Co-operative Bank Ltd (DMCBL) which does not have central bank’s licence, as it has already collected BDT 9.8 billion from depositors and disbursed BDT 10.8 billion in loans. A recent investigation by the central bank found that the DMCBL ‘under the guise of’ cooperative was conducting ‘unabated and unregulated’ banking activities. It warned that if the banking activities of the DMCBL were not stopped, a large number of depositors would face the risk of losing their money. Against the backdrop, the central bank in April in a notice warned public about engaging in banking activities with the DMCBL and conducted a detailed inspection at different branches of the institution in May 2016. The DMCBL has been operating banking business across the country by opening 116 branches without following regulations issued by financial regulators, the BB report said. The DMCBL collected the deposits from more than 2.13 lakh clients with paying very high rate of interest than that of the scheduled banks. The volume of the deposit with the DMCBL increased by 158.8% in last five and a half years from BDT 3.8 billion as of June 30, 2011 to BDT 9.8 billion as of December 31, 2015, while its loan disbursement increased by 173.9% from BDT 3.9 billion to BDT 10.8 billion. According to the DMCBL financial statement based on June 30, 2015, the share capital of the institution stood at BDT 33.7 million. But the share capital of the institution should have increased at least to BDT 200.0 million if it (DMCBL) had distributed share worth BDT 100.0 to 213,000 depositors.
Source: http://newagebd.net/235148/sans-banking-licence-dmcbl-collects-BDT -981cr-disburses-loan/
BSRM Steels raises BDT 2.5 billion through zero-coupon bonds
BSRM Steels, a unit of Chittagong-based BSRM Group, raised BDT 2.5 billion through what has been the largest issue of zero-coupon bonds by a company in Bangladesh yet. A zero-coupon bond, also known as discount bond or deep discount bond, is bought at a price lower than its face value, with the face value repaid at the time of maturity. The proceeds of the bonds will be utilized for BSRM Steels’ capital expenditures, refinance and equity investment in its subsidiary company. Ten institutions invested in BSRM Steels’ zero-coupon bonds, arranged by Standard Chartered Bank. Of the institutions, 66.0% were corporate, 21.0% banks and non-bank financial institutions, 7.0% insurance companies and 5.0% asset management companies. The subscription closing ceremony took place at the Westin Hotel on June 2 and was attended by BSRM Group Managing Director Aameir Alihussain, who is also the managing director of BSRM Steels. BSRM Group is a leading steelmaker, with a market share of about 20.0%. The company started its journey in 1952 and since then it has been pioneering the steel industry in the country. Standard Chartered is delighted to be the mandated lead arranger for this landmark transaction, said Abrar A Anwar, chief executive officer of the British bank’s Bangladesh operations. BSRM Steel was listed on the stockmarket in 2009. Its net profit was BDT 2.1 billion in 2015, up from BDT 1.2 billion a year ago. On the Dhaka Stock Exchange yesterday, each BSRM Steel share traded between BDT 93.0 and BDT 94.5, before closing at BDT 93.2. Sponsors hold 70.9% stake in the company, while institutions 17.9%, foreign investors 0.4% and general public the remaining 10.8%, according to DSE data.
Bangladesh Shipping Corporation moves to buy 10 more vessels
The Bangladesh Shipping Corporation (BSC) has taken a move to buy ten mother vessels to carry an entire load of fuel oil for Bangladesh Petroleum Corporation (BPC) and coal for power plants to be established in the country, officials said. The procurement of four new mother product oil tankers, each having a minimum of 80,000 deadweight tonnage (DWT), will cost a total of US$ 185 million and six new mother bulk carriers, each having equivalent capacity, will also cost US$ 185 million, they added. The BSC has recently sent a preliminary development project proposal (PDPP) in this connection to the ministry of shipping (MoS) to submit it before the Planning Commission for approval. BSC Managing Director H R Bhuiyan told that a memorandum of understanding (MoU) has already been signed between the BSC and Bangladesh-India Friendship Power Company (Pvt) Ltd (BIFPCL) to carry coal for Rampal Power Plant which is now under construction. Besides, the mother vessels will be needed for carrying petroleum fuel oil for BPC once the single point mooring (SPM) is built. The SPM will be built in the Bay of Bengal from where petroleum products will be carried through pipelines from mother vessels to onshore oil storage tanks.
Double package VAT to add only BDT 150.0 million
The government’s proposal to double the package value added tax in the fiscal year 2016-17 will add only BDT 150.0 million to national exchequer, thus having no significant impact on the revenue collection. In his budget speech, Finance Minister AMA Muhith proposed to increase package VAT for shops located at Dhaka and Chittagong city corporations areas to BDT 28,000 from BDT 14,000 a year in the upcoming fiscal. He also proposed increasing the amount for other city corporation’s areas to BDT 20,000 from BDT 12,000, to BDT 14,000 from BDT 7,200 for municipalities, and BDT 7,000 from BDT 3,600 for other areas of the country. After announcement of the proposed budget, small and medium traders protested the government’s proposal and demanded revision of it. Traders said their businesses might shut down one after another if the decision was not revised. Package VAT is a square foot-based rate which the small stores enjoy by paying VAT annually based on their shops’ locations and sizes, as fixed by the National Board of Revenue. It called upon the government to register retailers under the VAT law with a provision of paying 0.5% package VAT annually. The NBR’s primary estimates also found that the government might get an extra BDT 55.0 billion revenue, including BDT 43.3 billion from VAT and BDT 11.7 billion from customs duties by implementing budget proposals related to VAT and customs duties for FY2016-17. Of the amount, the highest BDT 24.9 billion will come from increasing price slab and supplementary duty on tobacco products – cigarettes, bidi and other smokeless tobacco products.
No bar to transfer ‘dividends’, ‘split bonus’ to margin loan providers
The issuer companies and mutual funds have no bar to transfer the ‘dividends’ and ‘split bonus’ to margin loan providers as the Supreme Court (SC) has upheld the securities regulator’s directive, jurists said. A four-member bench of the Appellate Division led by chief justice Surendra Kumar Sinha stayed the HC’s order following the appeal petition filed by two brokerage firms. Barrister Sheikh Fazle Noor Taposh, Barrister Mehedi Hasan Chowdhury, Barrister Md. Nuruzzaman and Barrister Mahfuzul Islam Milon appeared for the brokerage firms. In May, 2015, the securities regulator asked the issuer companies and mutual funds to provide the dividends and split bonus of the investors having margin accounts to the stock brokers instead of depositing into clients’ beneficiary owner’s (BO) accounts. The securities regulator had brought changes in the provision of distributing dividends following a proposal made by the stock brokers of the premier bourse. As per the directive, after getting the cheque and dividend warrants from the issuer companies and mutual funds, the depository participants (DPs) disbursed the fund into the clients’ accounts. As per the directive, the clients having margin loans were not able to transfer rights shares without the consent of stock brokers.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$48.50||(0.57)||(1.16%)|
|Crude Oil (Brent)*||$50.11||(0.43)||(0.85%)|
|Dow Jones Industrial Average||17,865.34||(119.85)||(0.67%)|
|USD 1||BDT 78.20*|
|GBP 1||BDT 110.91*|
|EUR 1||BDT 87.92*|
|INR 1||BDT 1.17*|
*Currencies and Commodities are taken from Bloomberg.