BB brings term repo to ease liquidity crisis
The Bangladesh Bank has launched a fresh liquidity support window named term repurchase agreement (repo) to supply money to the cash-strapped banks. The banks, which face a liquidity crunch, are now allowed to receive money through the new window of the central bank in three tenures — seven days, 14 days and 28 days. The term repo is a way for banks to avail money from the central bank for more than one-day duration. Term repo transaction will be conducted by the central bank through auctions held on all working days, according to a central bank circular issued recently. The bank will enjoy 4.75 percent interest for keeping its fund with Bangladesh Bank. The cash-strapped banks have not been receiving any money through the overnight repo for long as the yield of the product is much higher than the rate of the call money market. The interest rate of the call money market has been hovering between 3 percent and 4 percent in the recent months. The central bank’s latest initiative is expected to help the banks ride out the liquidity crisis.
Central bank asks NBFIs to rationalise deposit rates
The central bank has asked the non-banking financial institutions (NBFIs) to fix the interest rates on deposits at reasonable level for ensuring stability in the country’s financial sector. The advice came at an unscheduled meeting with chief executives of 11 NBFIs held at the Bangladesh Bank (BB) headquarters in Dhaka on Thursday with BB governor in the chair. The BB’s latest move came a day after the Bangladesh Association of Banks (BAB) decided to bring down the interest rates on both lending and deposits at 9.0 per cent and 6.0 per cent respectively from July 01. At the meeting, the managing directors (MDs) and chief executive officers (CEOs) of the NBFIs assured the central bank of following the advice on fixation of the interest rates on deposits. Currently, the NBFIs are allowed to collect deposits from individuals and organizations for three months which will not be allowed premature encashment.
BB relaxes banks’ general provisioning
Bangladesh Bank on Thursday exempted banks from maintaining general provision against two off-balance sheet exposures to increase supply of liquidity in the banking channel. Banking Regulation and Policy Department of the central bank issued a circular in this connection saying that banks would not require maintaining 1 per cent general provision respectively against bills for collection and guarantees against which government, multilateral development banks and international banks issue counter-guarantee. BB officials said that these two off-balance sheet exposures did not create any liability to banks in case of default or non-payment. Earlier, in September 2012, the central bank asked the banks to maintain 1 per cent general provision against the two items. BB withdrew the provision for guarantees considering the risk mitigating effect of guarantees against which government, MDBs and international bank issue counter-guarantee. The counter-guarantee issuing MDBs and international banks, however, have to have BB rating grade ‘1’ equivalent outlined in the Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III), the circular said. The circular came into force with immediate effect.
BB asks banks to implement interest cut decision
Bangladesh Bank on Thursday spurred bank owners to implement their decision to cut down interest rates by all banks from July 1. A delegation of Bangladesh Association of Banks, headed by its president met BB top brass to inform the central bank about the BAB’s decision to cut the interest rates. BAB sought the support of BB to bring down the lending rate to single digit from July 1. On Wednesday, BAB decided to bring down the lending rate to single digit, 9 per cent, and deposit rate of three-month tenure to six percent from July 1. BB governor advised the BAB leaders to properly implement the decision. Earlier in April, BB slashed cash reserve requirement or CRR of banks by one percentage point to 5.5 per cent for the benefit of private commercial banks. Finance minister has also proposed to reduce the corporate tax rate for banks and financial institutions (FIs) by 2.5 per cent in the budget for FY19.
News on interest rate cut breathes life into stocks
Stocks edged higher last week on active participation of both institutional and general investors. Bangladesh Association of Banks (BAB), a platform of bank owners, announced on Wednesday cuts in interest rates to boost investments in the country. The banks will not charge more than 9.0 per cent in interest on loans. They will also offer a maximum interest rate of 6.0 per cent on three-month deposits. Week-on-week, DSEX, the prime index of the Dhaka Stock Exchange (DSE), went up by 76.54 points to settle at 5,441. The stockbroker International Leasing Securities noted that lucrative price levels and upbeat market tempted the sidelines investors to inject fresh funds into stocks, taking the average turnover to the highest level in 2018. Two other indices of the DSE also closed higher. The DS30 index, comprising blue chips, gained more than 23 points to settle at 1,981. The DSE Shariah index advanced 25 points to close at 1,263. The Chittagong Stock Exchange (CSE) also closed higher with the CSE All Share Price Index – CASPI -advancing 281 points to settle at 16,786. The Selective Categories Index – CSCX – also rose 176 points to close at 10,156. The total turnover on the DSE rose to Tk 26.57 billion in the week, registering an increase of 102 per cent, from Tk 13.15 billion in the week before. The daily turnover averaged Tk 6.64 billion, which was more than 51 per cent higher than the previous week’s Tk 4.38 billion. The pharmaceuticals sector dominated the turnover chart, grabbing 17 per cent of the week’s total transactions. It was followed by the engineering sector with 14 per cent and pharmaceuticals 13 per cent.
Fund raising thru IPOs rises by 38.78pc in FY18
Fund raising by companies through issuing initial public offering increased by 38.78 per cent in the financial year of 2017-18 compared with that in the previous fiscal year. Eleven companies including two mutual funds raised Tk 541.25 crore in FY18, while nine companies including three mutual funds had raised Tk 390 crore in the previous fiscal year. In FY17, no companies had raised fund under the book building method of IPO, while three companies raised Tk 336.25 crore under the method in FY18. Companies follow two methods — fixed price and book building — in issuing IPO in the country’s capital market. The three companies that used the book building method in FY18 are: Aamra Networks (Tk 56.25 crore), Bashundhra Paper Mills (Tk 200 crore) and Aman Cotton Fibrous (Tk 80 crore).The other companies — Oimex Electrode (Tk 15 crore), Nahee Aluminum Composit Pane (Tk 15 crore), SK Trims & Industries (Tk 30 crore), Advent Pharmaceuticals (Tk 20 crore), Intraco Refueling Systems (Tk 20 crore) and Queen South Textile Mills (Tk 15 crore) — raised fund under the fixed price method. Of the two mutual funds, ICB AMCL First Agrani Bank Mutual Fund raised Tk 50 crore while CAPM IBBL Islamic Mutual Fund pooled Tk 30 crore in FY18 under the fixed price method. The primary market remained vibrant in FY18 with the IPOs of a number of companies being oversubscribed. For example, the IPO of Queen South Textiles was oversubscribed by 43 times, Oimex Electrode 41 times, Nahee Aluminum 37 times and Advent Pharma 35 times.
22 cos in IPO pipeline
Twenty-two companies have applied to the Bangladesh Securities and Exchange Commission for raising more than Tk 1,342 crore in total by floating shares through initial public offerings. Of the firms, 11 companies have sought to pool Tk 275.28 crore in total under the fixed price method, while the rest 11 would raise Tk 1,066.86 crore under the book building method. New Line Clothing has applied for raising Tk 30 crore, Silco Pharmaceuticals Tk 30 crore, Electro Battery Company Tk 22.50 crore, Mohammed Elias Brothers Poy Tk 25 crore and SS Steel Tk 25 crore under the fixed price method. Kattali Textiles (Tk 34 crore), Express Insurance Limited (Tk 26.79 crore), Desh General Insurance (Tk 16 crore), Infinity Technology (Tk 30 crore), Crystal Insurance (Tk 16 crore) and Genex Infosys (Tk 20 crore) would also use the fixed price method in issuing their IPOs. Under the book building method, STS Holding has sought to raise Tk 75 crore, Shamsual Alamin Real Estate Tk 80 crore, Esquire Knit Composite Tk 150 crore, Runner Auto Tk 100 crore, Popular Pharmaceuticals Tk 70 crore, Delta Hospital Tk 50 crore, Index Agro Tk 40 crore, Energypac Power Generation Tk 149.86 crore, Star Ceramics Tk 60 crore and Baraka Patenga Power Tk 225 crore. According to the information in their IPO prospectuses, most of the companies have planned to raise funds in order to repay long-term bank loans and to expand their existing business capacity in line with the growing demand for their respective products.
Govt to impose income tax on share transfer abroad
The proposed national budget for the upcoming 2018-2019 financial year has created an opportunity for the National Board of Revenue to impose income tax on transfer of shares of foreign companies having subsidiary in Bangladesh. Officials said that the proposed provision would establish taxing rights of the NBR over various forms of share transfer of a foreign company if it has a subsidiary or operations in any form in Bangladesh. The NBR will now be able to claim income tax proportionately on gains derived through share transfer of the parent company taking place abroad. The proposed provision says, ‘The transfer of any share in a company that is not a resident of Bangladesh shall be deemed to be the transfer of an asset situated in Bangladesh to the extent that the value of the share transferred is directly or indirectly attributable to the value of any assets in Bangladesh.’ Income through such transfers will be considered to have accrued or arisen in Bangladesh.
NBR to claim duty dating back up to five years
Subsidy expenditure is set to increase 80.26 percent to Tk 37,804 crore in fiscal 2018-19 as the government looks to bankroll lower gas National Board of Revenue will now claim customs duty dating back up to five years if it can detect duty evasion or finds any duty or charge unrealized within in the time, according to the Finance Bill-2018. Businesses will also have to preserve business records of up to five years, it says. Currently, the customs authorities of the revenue board can claim arrears dating back up to three years and businesses including importer and exporter also preserve their business records for the same period. Finance minister in his budget documents placed before parliament on June 7, proposed to bring amendments to the two relevant provisions of the Customs Act-1969 through the finance bill. Customs officials say that the proposal to amend the provision has been placed to make it aligned with other laws and regulations related to revenue collection. Income tax and value-added tax authorities of NBR will now be able to claim taxes for previous five years, they note. Both income tax and VAT laws do not allow issuing fresh demand notice for realizing arrears exceeding five years. As per the proposed amendment, if customs officials find that any duty or charge has not been mistakenly levied or has been short-levied or has been erroneously refunded, they will serve a notice within five years of the relevant date to the person liable to pay the amount asking him or her to pay the amount. Taxpayers must get the opportunity to explain before taking any steps to realize the amount.
ADB to provide $300m for infrastructure projects
The Asian Development Bank (ADB) is set to provide US$300 million to state-run Bangladesh Infrastructure Finance Fund Limited (BIFFL) to catalyse long-term infrastructure project finance. The BIFFL will borrow the fund during 2018-2022 period, finance ministry officials said. The ADB, in a note, said Bangladesh faces an infrastructure financing gap of US$9.0 billion a year. Some of these projects are at advanced stage and would require financing during fiscal year (FY) 2018-19. The BIFFL wants to provide funds for these projects after taking out loans from the Asian lender. The BIFFL is funded mostly by government equity and contribution. It has no access to long-term debt. This provides the most effective way to help Bangladesh meet the $9.0 billion infrastructure funding gap. In the past, the BIFFL partially funded Dhaka elevated Expressway and Dhaka Bypass.
Higher penalty for noncompliance
Corporate taxpayers will have to pay more in fine from the next fiscal year for noncompliance, which includes non-submission of return on withholding tax and a statement on employees’ filing, according to a proposal of the National Board of Revenue. The tax authority is seeking to raise the fine by 10 times to Tk 5,000, or 10 percent of the tax imposed on last assessed income if a company, cooperative or NGO does not submit the return of withholding tax and statement or provide information. The fine has also been hiked four times to Tk 1,000 per month for the delay in compliance, according to the proposal by the NBR. Until the outgoing fiscal year, companies face penalty of Tk 500 for noncompliance regarding the statement on payment of salary, issuance of certificate on tax deduction and information on payment of interest and dividend. In case of the continuation of default, the amount of fine was Tk 250 per month. The tax authority’s move to hike the penalty and expand the coverage of the fine came after it found that only 5 percent companies submit returns on withholding tax, which accounted for 62 percent of the total income tax collected in 2015-16.
Apparel exports to Asian markets on the rise
Garment shipments from Bangladesh to its major Asian markets—India, China and Japan—are rising by the day thanks to competitive prices the country offers and spiralling production cost in China. Garment export to these three markets grew 17.79 percent year-on-year to $1.39 billion in July-May period of the current fiscal year, according to data from the Export Promotion Bureau (EPB). Japan, with a retail garment market worth nearly $50 billion, is the largest export destination for Bangladesh among the Asian nations. In July-May period, Bangladesh sent $787.13 million worth of garment items to Japan, which is a 13.04 percent year-on-year rise. The overall export to Japan has already crossed $1.05 billion mark in the first 11 months of the current fiscal year from $945.47 million last year. Another promising market in Asia is India, which is also a destination of more than $50 billion worth of garment items. Garment shipments to India from Bangladesh more than doubled year-on-year in the first 11 months of the fiscal year. Between July last year and May this year, apparel items worth $253.07 million were shipped to the neighboring country, in contrast to $117.21 million a year earlier, according to the EPB data. Garment exports to China in the July-May period fell 2.82 percent year-on-year to $347.08 million, the EPB data said. Overall export to China also declined by 28.91 percent year-on-year to $626.75 million during the period.
Paddy price rises as tariffs on rice imports loom
The price of paddy has begun to rise in anticipation of the tariffs to be reintroduced on rice imports in the government’s budget for the coming fiscal year. The impact of the tariffs has yet to be felt in the rice market due to the relatively low trade after Eid and lower rice imports, but traders say rising paddy price may soon affect the price of rice. According to the director general of the Food Directorate, sufficient food reserves have prompted the government to purchase rice from domestic sources instead of imports this season. Finance Minister had announced the reintroduction of the 28 per cent tariff on rice imports in the prospective budget for the 2018-19 fiscal year after it was reduced following a poor harvest and flood damage in 2017. According to the Food Ministry’s Food Planning and Monitoring Unit, the government currently has 1,323,000 metric tonnes in food reserves, bdnews24 reported. Of these reserves, approximately 1,066,000 tonnes are rice and 257,000 tonnes are wheat. An additional 52,000 tonnes of food grains are awaiting clearance at the ports.
Move to set up 100 MW grid-linked solar plant
The North-West Power Generation Company Limited (NWPGCL) will set up a 100-megawatt grid connected photovoltaic (PV) Solar Power Plant in Faridpur. Once the proposed 100 MW grid connected PV solar power plant is set up in Faridpur it will be the NWPGCL’s first green venture, reports UNB. Officials said the NWPGCL has already submitted its development project proforma (DPP) to the Power Division seeking approval to move ahead with the project. The NWPGCL’s 100 MW Faridpur plant is part of the government plan, said a top official of the company. The company presently operates four power plants, which are Sirajganj 225 MW Combined Cycle Power Plant (1st Unit), Sirajganj 225 MW Combined Cycle Power Plant (2nd Unit), Khulna 225 MW Combined Cycle Power Plant and Bheramara 410 MW Combined Cycle Power Plant.
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)||$68.58||↑3.08||↑4.70%|
|Crude Oil (Brent)||$75.55||↑1.21||↑1.63%|
Major Currencies Exchange Rates Movement in Last Seven Days *
|USD 1||BDT 84.16|
|GBP 1||BDT 111.61|
|EUR 1||BDT 98.06|
|INR 1||BDT 1.24|
*CURRENCIES AND COMMODITIES ARE TAKEN FROM BLOOMBERG.