Banks to cut lending rates in phases
Banks are sticking to their directors’ decision to bring down the lending rates to 9 percent from July 1 amid growing dilemma over how to execute the plan for a large number of loan products. The Bangladesh Association of Banks (BAB), last week issued a directive asking all of its member banks to reduce the interest rate to 9 percent from 12-15 percent now without specifying any loan product. It also asked banks to bring down the deposit rate to 6 percent. But banks are unsure when its cost of funds will come down to 6 percent from 8 percent to 10 percent now, which, according to bankers, is a prerequisite for cutting the lending rates. Yet, bankers are taking preparations in line with the BAB’s instruction on the lending rate. The Association of Bankers Bangladesh (ABB), a forum of chief executives of the private banks, will discuss the issue at a meeting today. “Initially, we will bring down the lending rates to 9 percent for industrial and manufacturing loans as well as for working capital,” said a chief executive officer of a private bank. Another CEO said his bank will cut the lending rate for large corporate borrowers as per the BAB’s decision. A third CEO said his bank will cut the interest rates in different phases. The central bank has made funds cheaper for all banks by reducing its repo rate by 75 basis. The chairman of the ABB, said the interest rate cut will depend on the boards of respective banks and bankers will execute the decision only.
BB move to discourage rice import
Bangladesh Bank (BB) yesterday tightened measures to discourage rice imports with a view to ensuring fair prices for growers. The central bank directed banks to fix a margin for opening letters of credit (LC) for rice import based on banker-client or transactional relations instead of providing zero-margin benefit. This means businesses would have to bear a portion of import costs while opening the LCs. “In no way LCs can be opened for rice import at zero margin”. The central bank issued the directive after the government re-imposed 28 percent duty on rice import early this month to protect growers, who were making sales well below their production cost amidst surging imports and increasing domestic production this year. The government reduced the duty in two phases in June and August last year to increase supply and curb a price spike owing to crop losses for floods in the north, which accounts for over half of the production of boro rice. The central bank has also extended the loan disbursement tenure of current credit (hypothecation and pledge) for mill owners and rice traders. This means they have to adjust their current credit with banks within 45 days instead of the previous 30 days.
NBFIs warned over attracting depositors via messages
Bangladesh Bank yesterday instructed non-bank financial institutions (NBFIs) not to send text messages through mobile phones to attract deposits. Such activities have created an ’embarrassing situation’ among professionals and clients, the BB said. Some NBFIs have been offering higher returns against deposits by sending texts through mobile phones, according to a central bank circular. It is not expected to run this kind of marketing activities, it said. The financial institutions act does not allow the non-banks to mobilize deposits through such means. The NBFIs are only allowed to display the interest rate, charge, commission and fee of the loan products through their branches and websites as per a central bank circular issued in April this year.
Price upheaval wreaks havoc on investors
Prices of newly listed companies continue to rise abnormally on the Dhaka Stock Exchange without any apparent reason, which experts said may eat up general investors’ money. Even the regulator’s restriction for 30 days on margin loan for buying new shares has failed to rein in the unusual rise in new share prices. A group of large scale investors, mostly institutional, such as merchant banks, asset management companies, mutual funds, stock dealers, banks, financial institutions, and insurance companies play up with these shares spreading rumors till they sell off their shares. These investors are allowed to sell 50 percent of their shares of a stock on the first trading day. Then they have to wait six months to sell another 25 percent and then another three months to sell the rest. DSE data showed most of the companies that made debut in 2017 and so far this year saw their shares rise abnormally. These shares remained overvalued in the first few months following the debut before a major correction took place, dealing a blow to general investors because eligible investors get rid of their holdings when the prices are high.
Stocks dip for 2nd day before budget passage
Dhaka stocks dropped for the second day on Tuesday as investors continued selling shares ahead of passage of the national budget for the 2018-19 fiscal that begins July 1. DSEX, the key index of Dhaka Stock Exchange, lost 0.41 per cent, or 22.51 points, to close at 5,411.27 points on Tuesday after losing 88.20 points in the previous trading session. The proposed financial bill for the year of 2018-19 will be passed in parliament on Thursday. Market operators said investors took cautious steps as they feared that the government might make major changes to the budget at the last moment following criticisms from economists and professionals over different proposals in the budget. Before the two-day loss, the market had gained four consecutive sessions after bank owners declared that they would cut interest rate to single digit. Their announcement came after the government had offered a number of incentives for the banking sector. The turnover at the DSE dropped further to Tk 639.42 crore on Tuesday compared with that of Tk 686.09 crore in the previous session. Of the 335 companies and mutual funds traded on the day, 196 declined, 102 advanced and 39 remained unchanged. DS30, the blue-chip index of the DSE, also shed 0.57 per cent, or 11.36 points, to finish at 1,965.68 points. Shariah index DSES lost 0.28 per cent, or 11.36 points, to close at 1,259.83 points.
BSEC okays Tk 34-cr Kattali Textile IPO
The Bangladesh Securities and Exchange Commission on Tuesday approved a proposal of Kattali Textile Limited to raise Tk 34 crore from the capital market through initial public offering. The textile company will float 3.40 crore shares at an issue price of Tk 10 each. The company will use the IPO proceed to construct factory building, purchasing capital machinery, install electric transformer and generator, pay banks’ loans, and to meet up IPO expenses. As per the entity’s audited financial statement for the year ended on June 30, 2017, company’s net asset value per share and weighted average earnings per share are Tk 20.48 and Tk 1.94 respectively. NRB Equity Management is the issue manager of the company’s IPO.
Govt’s debt from bond sales set to fall 13pc
The government liabilities, in terms of borrowing through domestic debt securities, are likely to be 13 per cent lower in the next fiscal year (FY) over those of the outgoing fiscal. The domestic debt securities are treasury bills (T-bills) and treasury bonds (T-bonds) as well as ‘ways and means’. It has projected mobilization of Tk 1.22 trillion through the sale of the debt securities. It also expects that the balance from the ways and means will stand at Tk 100 billion in the year beginning on July 01, the budget document showed. The yield curve derived from the T-bills and bonds is an important benchmark for the financial market. Noted economist Dr Mirza Azizul Islam said T-bills and bonds have witnessed a falling trend in transaction. But the borrowing from the national savings certificates is on the rise. As Bangladesh truly lacks an effective bond market, he said, poor transactions of government securities are no more an important matter.
FY 19 budget to be passed today
The proposed finance bill will be passed in parliament today while the annual budget for the 2018-19 will be passed on Thursday. Proposal of 2.5 per cent cut in corporate tax for bank companies and keeping the income tax threshold unchanged by in the proposed budget have been criticized as ‘boon for affluent and bane for middle class’ by many including the ruling party allies. Officials of the finance ministry confirmed that Muhith would increase duty on cell phone accessories assemblers to 25 per cent after proposing only five per cent duty from previous 45 per cent. The finance minister likely to clarify the proposal for imposition of value added tax on virtual shopping to clear the confusion that online shopping has been proposed to be taxed. He would announce slashing five per cent VAT on internet use to 10 per cent from the proposed 15 following urge by telecommunications and ICT minister and ICT industry leaders. For expediting the implementation of the annual development program of Tk 1,73,000, Muhith proposed releasing fund in favor of project directors from July 1, the first day of the financial year. For financing the Tk 1,25,293 crore budget deficit, the finance minister projected that Tk 54,067 would be taken as loan from the external sources and Tk 71,226 would be taken from domestic sources.
Govt plans Tk 10,000cr fund for jute sector
The jute ministry is working on a policy to form a Tk 10,000 crore fund to provide low-cost loans for the development of the nearly $1 billion export earning jute sector. The government will form a 20-year revolving fund based on the budgetary allocation to provide loans to farmers, traders, industrialists, diversified goods producers and exporters. The loans will be disbursed at 5 percent interest and half of the interest payments would come from the state coffer as subsidy. Bangladesh Bank would be assigned to manage the fund, to where banks would also enjoy access under refinancing arrangement. In Bangladesh, around 2 lakh people work in 176 public and private mills, which process two thirds of the country’s annual jute production of 14 lakh tonnes, according to data by Bangladesh Jute Spinners Association. Of it, 8.36 lakh tonnes are exported and the rest consumed locally, according to the association.
ADB gives $500m for 800MW plant
The Asian Development Bank’s board of directors has approved a $500 million loan to develop a modern 800 megawatt power plant in Khulna along with associated connections to natural gas and power transmission facilities. The ADB-financed project design will ensure that the Rupsha plant uses the latest combined cycle technology, which offers the highest efficiency to convert gas to electricity. It will also use the most advanced water treatment processes to purify and recycle liquid waste at the end of the industrial process, leaving zero discharge. To supply gas to the Rupsha power plant, the project will construct gas distribution pipelines of 12 kilometres. The project will also finance construction of a 230-kilovolt switchyard at the power plant and 29km of high capacity transmission lines to transfer electricity from Rupsha to the grid. The total cost of the project is $1.14 billion, with the Islamic Development Bank contributing $300 million in co-financing and Bangladesh $338.5 million on top of the ADB’s support. The project is due to be completed by the end of June 2022. Grant financing of $1.5 million will also be provided from the ADB’s Japan Fund for Poverty Reduction.
AIT on mobile phone parts’ import to be cut
The National Board of Revenue has decided to reduce advance income tax on import of a number of parts and accessories mainly for mobile manufacturing and assembling industry to facilitate growth of the sector. Income tax wing of the NBR on Monday issued pre-publication of a gazette notification proposing an amendment to the provision 17A of the Income Tax Rules-1984 to reduce the AIT to 2 per cent from the existing 5 per cent on import of 17 types of parts for the sector. Through the gazette notification, the NBR sought suggestions or objections, if any, from stakeholders on the proposed amendment to the rules by June 30. The pre-publication of the gazette notification will be considered final if no suggestion or objection is made, it said. Through the same notification, the NBR also waived AIT on import of some computer software including database, productivity, communication or collaboration software.
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)||$70.82||↑2.41||↑3.52%|
|Crude Oil (Brent)||$76.70||↑1.81||↑2.42%|
Major Currencies Exchange Rates Movement in Last Seven Days *
|USD 1||BDT 83.78|
|GBP 1||BDT 110.77|
|EUR 1||BDT 97.62|
|INR 1||BDT 1.22|
*CURRENCIES AND COMMODITIES ARE TAKEN FROM BLOOMBERG.