Scheduled banks cut their rates of interest on lending further in March, the 27th month in a row, as the business people were reluctant to borrow from banks amid a dull business situation in the country, said Bangladesh Bank officials. The rates of interest on lending declined to 9.70% in March from 9.77% in February this year. A BB official told New Age on Thursday that banks were forced to lower the lending rates due to a sluggish credit demand from the business people. He said that the majority of banks had recently cut their rates of interest both on deposits and lending in the face of dull business. Due to the lower credit demand from the business people, banks are now holding huge excess liquidity that has also forced them to cut interest rates for their deposit products, he said. The depositors are suffering due to lower rates of interest on the banks’ products, he observed. The interest rate on lending might decline further in the months to come if the existing sluggish business situation does not improve, he said. Many of the banks are now charging home loan at around 8.0% while personal loan rate has also come down to as low as 9.0%, which were at around 18% and 20% respectively in two to three years back, the official said. The central bank failed to achieve the private sector credit growth target of 16.6% it set for the July-December period of FY 2016-17. Experts said that the investment in the private sector did not increase much as there was no improvement in land and energy crisis mitigation. The country is not now facing political unrest, but the business people are still uncertain whether to expand their business or not, they said. The interest rate on lending decreased in recent months while banks are facing huge excess liquidity, they said. So, the demand side of the credit is the major problem for not achieving the private sector growth target set by the BB, they said. The weighted average interest rate on lending was 9.85% in January of 2017, 9.93% in December, 9.94% in November, 10.03% in October, 10.15% in September, 10.24% in August, 10.3% in July, 10.39% in June, 10.57% in May, 10.64% in April, 10.78% in March, 10.91% in February and 11.05% in January of 2016. The rate had declined throughout in 2015.
Forex reserve falls to USD 31.5 billion after routine Asian Clearing Union (ACU) payment
Bangladesh has made a routine payment of more than USD 1.0 billion to the Asian Clearing Union (ACU) against imports during the March -April period of this year, officials said. After the payment, the country’s foreign exchange (forex) reserve came down to USD 31.5 billion Thursday from the country’s highest level of USD 32.6 billion recorded on the previous working day, according to Bangladesh Bank (BB) figures. An ACU member pays bimonthly the bills plus interests against its imports from the other member countries of the grouping. The amount of such payment rose to USD 1.12 billion in the last installment from USD 1.1 billion earlier mainly due to higher imports from the ACU member countries, said the BB official. The ACU is an arrangement involving Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives, through which intraregional transactions among the participating central banks are settled on a multilateral basis. The union started its operation in November 1975 to boost trade among the member countries. Bangladesh and Myanmar joined the union as the sixth and seventh members in 1976 and 1977 respectively.
Bangladesh Bank now contemplates joining BRICS bank: NDB membership with voting right on offer
The emerging BRICS bloc has offered Bangladesh to join its recently-installed New Development Bank (NDB) as a member with equal voting rights, officials said Saturday. Ministry of Finance (MoF) officials said NDB President K. V. Kamath in Washington recently held out the offer for Bangladesh to join in a pool of 15 new members to be inducted soon. The offer came at a bilateral meeting between the NDB President, Mr Kamath, and Finance Minister AMA Muhith on the sidelines of the International Monetary Fund (IMF)-World Bank spring meet in Washington, DC, late April. The bloc of emerging economies like Brazil, Russia, India, China, and South Africa (BRICS) formally set up the NDB in July 2015. The initial authorized capital of the China-initiated bank is USD100 billion divided into one million shares having a par value of USD 100,000 each. Earlier, Bangladesh had been offered to join the bank in its initial stage of discussion in 2013-14. But Bangladesh had not joined for a lack of proper modalities and terms of condition for the other members outside the BRICS at the Bank that time, MoF officials said.
Bangladesh’s 52.0% banks ran the risk of information management security breaches in 2016, of which 16.0% were in the highest risk, a report found. Bangladesh Institute of Bank Management (BIBM) released the survey report at a workshop on “IT operations of banks”, at the BIBM auditorium in Dhaka yesterday. Around 36.0% of the surveyed banks were found in high risk of information loss at any moment, 32.0% banks were under moderate risks and 16.0% banks in low risk. The research found that a major portion of the IT budget of the banks is used to procure hardware. The portion of expenditure for hardware was 40.4% of IT budget in 2016, slightly down from 41.9% in 2015, according to the survey. The second highest amount of their budget went to the software sector, and the spending on security, training and audit was very poor in the last six years. In 2016, around BDT 17.9 billion was invested on the IT system in the banking sector, up by 22.0% from BDT 14.7 billion in 2012. The report says the total number of employees working in the IT department was not sufficient and they are under tremendous stress. In 2016, the average, minimum and maximum number of employees of IT department of different banks was 66, 15 and 320 respectively. Core Banking Software (CBS) plays a key role for online banking, and most of the banks use foreign CBS, the survey found. In 2016, some 56.0% banks were found using foreign CBS while 34.0% were using local CBS. Microsoft Windows was the most popular operating system in banks. Around 97% terminals of banks were running under Windows operating system last year. Linux was used in around 0.35% of the terminals, Google Chrome in 2.14%, Unix 0.49% and Mac 0.02%, the report said. About 98.0% terminals of different banks have licensed operating system while the rest were using free version of different operating systems. About 30.0% banks have online payment gateway service for e-commerce payment processing. The banks’ budget for cyber security increased 60.0% after the reserve heist of Bangladesh Bank last year that took away USD 81.0 million from its reserve account with New York Federal Reserve Bank, said the report.
Financial transaction over the mobile phone posted a double-digit growth of 10.2% during the third quarter of the current fiscal, surging over official caps on MFS transactions. According to the data coming from Bangladesh Bank, a total of BDT 725.8 billion was transacted through MFS platforms during the January-to-March period of 2016-17. This amount is around BDT 67.4 billion higher than the transactions made through mobile financial-service platforms during the previous quarter of this fiscal. Per-day average transaction had also gone up by around 12.7% during the same period, the BB data suggest. While around BDT 7.2 billion had been channeled through MFS back in the second quarter of the current fiscal year, it went up to BDT 8.1 billion in the last quarter. The central bank figures also suggest that while around 391.8 million MFS transactions took place back in the third quarter of the current fiscal, this figure has risen to 425.6 million during the first three months of this year. This latest upsurge in MFS took place despite the recent curbs imposed by the central bank on the amounts of daily and monthly transaction that can be made through MFS platforms. The Bangladesh Bank, in a circular issued on January 11, brought down the daily ceiling of mobile cash-in to BDT 15,000 from BDT 25,000 while the maximum cash-out limit was slashed to BDT 10,000 from BDT 25,000. Besides, monthly maximum cash-in limit was slashed to BDT 100,000 from BDT 150,000 while the maximum monthly limit on cash-out was brought down to BDT 50,000 from BDT 150,000. The new BB provision, which came into force on February 01, was originally intended to rein in the growing use of MFS as illegal channels for remittance from abroad into the country. However, some industry insiders was initially skeptical about the move, fearing that the restriction would create inconvenience for the MFS subscribers and would greatly decrease the flow of MFS transactions in the country.
Bangladesh lukewarm to World Bank’s reform credit support
Bangladesh is found reluctant to take the World Bank’s development policy credit (DPC), a financing window to support government’s policy and institutional reforms, officials said. The multinational lender had been in talks with the government for years on reforms of various financial policies and was ready to offer DPC in this regard, they added. Though the government is continuing negotiations it is not that much interested to take such credit which is usually tagged with time-bound reforms. Officials said between 2003 and 2008, the World Bank agreed to support 10 reform projects extending USD1.565 billion worth of DPC. During the period, various projects were completed with credit support for voluntary retirement scheme (VRS) in the state-owned enterprises, enterprise growth and bank modernization, setting up of Adamjee export processing zone and emergency support after the cyclone Sidr. They said despite having some positive results, the government did not take any more DPC after 2008.
PMO asks fin min to take action against 3 cos as BB offers respite
The Prime Minister Office has recently asked the finance ministry to take punitive measures against three companies — M/s BTL, M/s Mahin Textiles and M/s Pinakal Textiles Ptv Ltd — which were involved in the Hallmark Group-Sonali Bank scam. The directive came as the three companies were recently freed from their liability for the scam as Bangladesh Bank debited the Sonali Bank’s current account kept with the central bank by paying Tk 129.38 crore to Agrani Bank to settle inland bills of the companies ignoring its (BB) own inspection team’s findings. The Hallmark Group-Sonali Bank loan scam involving around Tk 4,000 crore took place in 2012 at Sonali Bank’s Sheraton Hotel branch in Dhaka. The PMO said that the business entities, owned by Md Mahtab Hossen, had withdrawn Tk 135.68 crore from Agrani Bank in the name of exports without exporting any product to Hallmark Fashion, Paragon Neat Composite Ltd and Nokshi Neat Composite Ltd. The PMO issued a letter to the finance ministry on January 25 asking it to take punitive measures against Mahtab and the Agrani Bank officials who were involved in the scam.
IPO quota facility for crash-affected investors may get further extension
The Bangladesh Securities and Exchange Commission is likely to request the finance ministry to extend by another year the 20% quota facility the small-scale investors affected by 2010 market crash have been enjoying in the initial public offering subscription. As per an earlier guideline approved by finance ministry, the timeframe of the 20.0% quota facility for the affected small investors will expire on June 30 this year. As per general trend of the capital market, IPO shares are usually traded at comparatively higher price at the secondary market than their issue price mainly due to a section of investors’ unusual attraction on those scrips in first couple of trading sessions. Considering this, the quota facility for the affected inventors usually allows them to make profit. According to a BSEC report on 2010-11 stock market crash, at least 0.96 million investors were affected by the crash. Finance minister AMA Muhith on March 4, 2012 announced a special package for the capital market investors including a 20.0% quota facility in IPOs for the year 2012-2013 for small scale investors who suffered because of the 2011 stock plunge. Since the 2012, the government has extended several times the quota facility. Under the package, 50.0% of interest on the past year’s margin loans was also waived. Besides the quota and interest waiver facility, the government after the crash also launched a BDT 9.0 billion refinance scheme for the affected investors with a view to provide loan to the investors at 9.0% interest in 2013. The interest rate was later reduced to 7.5% due to stagnant state of loan disbursement under the scheme. The supervision committee on the scheme in April proposed the finance ministry for further interest cut to 6.0% from 7.5% as BDT 2.6 billion of the fund had remained idle for more than a month.
The government has slashed projection for merchandise exports by 3.0%age points to 7.0% for this fiscal, which suggests the country may miss its USD 37-billion export target. Analysts think this downward revision will also result in a sizable shrinkage of government earnings derived from export proceeds to the tune of over USD 230.0 million a year considering 0.7% growth in export receipts. Besides, the export tariffs which are usually imposed on some items like tobacco exports also started to shrink as a result of continued fall in the overall exports. The export trade grew by only nearly 4.0% to USD 26.0 billion during eight months to February last. But it had expanded nearly 9.0% during the same period a year back, official documents show. Economists familiar with such developments on the trading front told the FE that the export would continue to fall and the growth rate may stand around 5.0% at the end of the financial year on June 30 as the country failed to retain its position on the global market. According to a calculation Bangladesh’s REER appreciated over 6.5% in December 2016 against December in 2015. REER considers inflation in the trading partners, and if the REER appreciates, it adversely impacts on the export receipts. The WB economist said cost of doing business in Bangladesh remained high, leading to the shrinking of chance of export diversification.
Asian Development Bank (ADB) has improved its performance in loan disbursement in the year 2016, according to the latest version of the regional bank’s report on its aid effectiveness. The report titled ‘2016 Development Effectiveness Review’ was released at the 50th Annual Meeting of ADB’s Board of Governors in Japan’s port city of Yokohama It showed that Bangladesh, China, India, Pakistan, and Viet Nam accounted for 66 per cent of all sovereign project and result-based lending disbursements in the last year. “Bangladesh had the highest disbursement ratio, 23.4 per cent, of the top five countries with disbursements of $823 million,” it mentioned. The disbursement ratio means the ADB’s actual disbursed amount against its lending target.
The government is set to lay down an ambitious foreign aid utilisation target for next fiscal year with the aim of quick implementation of many transforma-tional infrastructure projects. Foreign aid will account for Tk 57,000 crore (equivalent to about $7 billion) in fiscal 2017-18’s development budget, said officials of finance and planning ministries — almost double the country’s overseas fund utilisation record. Bangladesh could never utilise more than $4 billion of foreign aid in a year. Some Tk 35,797 crore of foreign aid has been allocated for this fiscal year but only 42 percent of the amount could be utilised in the first nine months. Japan, India, China and Russia have committed to financing a number of mega projects against which a big amount is expected to be released in the upcoming fiscal year, said a planning ministry official.
Many are still expecting goods and services to become costlier for the imposition of uniform 15.0% VAT under the new law despite repeated assurances from the National Board of Revenue. “We should be happy with the NBR’s statement, but we are worried that prices may rise,” said Abul Kasem Khan, president of the Dhaka Chamber of Commerce and Industry. Goods and services that are currently subject to multiple VAT rates — such as edible oil, processed spices, paper, biscuits, electricity, restaurants, rod, bricks, apartments and furniture — may see their prices creep up once the uniform VAT is applied from July. Currently, the NBR collects reduced rates of VAT on 85 products based on tariff value and 15 services based on truncated base. Their discontinuation means people will have to pay VAT at the market price instead of the administered one. But the NBR maintains that the new law will not increase the prices of goods in general as businesses will be able to get rebates. So, in theory, the prices of various products should decline as rebate will be effective in all stages of the value chain, according to taxmen. Under the existing law, getting rebates is a long drawn-out process.
Government to invest USD 500.0 million in tech parks
The government has set a target to develop infrastructure for the ICT sector by investing about USD500 million in the next two years to build 28 hi-tech, software and IT parks across the country. The funds will come from the World Bank, Asian Development Bank, Indian credit and the government’s own sources, Zunaid Ahmed Palak, state minister for ICT division, told The Daily Star recently. Simultaneously, the government is developing human resources, establishing connectivity and improving related policies, the minister added. The government’s initial target is to earn USD1 billion in software exports and outsourcing by 2018. By 2021, the ICT sector will contribute more than 5% to the country’s gross domestic product, according to the government’s target. The Bangladesh Hi-Tech Park Authority (BHTPA) has made progress in building the Sheikh Hasina Software Technology Park at Janata Tower in Dhaka at a cost of BDT 248 crore, which will be inaugurated in June.
Western Marine Shipyard today launched the country’s first offshore patrol vessel (OPV) “Doria” for its foreign buyer at the shipyard in Chittagong. The OVP vessel was handed over to its Danish buyer and will be exported to the Kenyan government, its end user, shortly. The WMS launched the vessel marking a milestone in the country’s emerging ship building industry. It has an overall length of 54.7 metre and can be operated at a maximum speed of 35 knots. It will be operated in the Indian ocean of East Africa. The vessel has been built for a Danish buyer JGH Marine A/S and the end user would be Kenyan Ministry of Fisheries, Livestock and Agriculture and Blue Economy wing. The agreement for building the vessel was signed between the JGH Marine and the Kenyan Government in 2012. The vessel will be used in the maritime territory of the Republic of Kenya for the security of sea resources and also to expedite the assistance in natural calamities. Shipping Secretary Ashoke Madhab Roy, Commander of Chittagong Naval Area, Bangladesh Navy M Abu Ashraf, minister Willy Bett and principal secretary of the Kenyan Ministry Micheni Japhet Ntiba, Danish ambassador to Bangladesh Mikael Hemniti Winther and CEO of JGH Marine, Denmark Niels Holstein were present on the occasion as guests. According to the Managing Director of Western Marine Shipyard, a total of 40 ships were exported over the last five years, which has brought the company remittances worth more than USD 150 million. Western Marine alone has exported 25 ships.
The Asian Development Bank is ready to partner with Bangladesh in generating clean and renewable energies, including solar, geothermal and hydropower. Takehiko Nakao, the bank’s president, lauded Bangladesh for making good strides in ensuring workplace safety following the Rana Plaza disaster and for posting an ‘encouraging’ 7.0% GDP growth rate. The 50th annual meeting of the bank kicked off yesterday in the Japanese port city of Yokohama. Speaking at the inaugural press meet at the Pacifico Yokohama conference centre, Nakao explained the interrelation between ADB and China-led Asian Infrastructure Investment Bank (AIIB). The AIIB is trying to emerge as a multilateral banking institution with a USD 3.0 billion lending portfolio, as opposed to the ADB’s USD 31.0 billion. “When we started 50 years back, we had only 30 staff members in Manila,” said the ADB president. Today, the bank has over 3,000 staffers, including 1,100 overseas employees. The AIIB is evolving with a 100-strong workforce now. The 67-member ADB began its May 4-7 annual meet yesterday amid its golden jubilee celebrations. As many as 5,500 delegation members, representing member country finance ministers, governors, officials, NGO and civil society members and journalists gathered at the ADB Board of Governors meeting. Finance Minister AMA Muhith represented Bangladesh.
Hybrid adoption to boost Bangladesh cotton production
Bangladesh cotton authority expressed the hopes that the country would be able to produce one million bales of cotton by 2020 by introducing Bt cotton. At present Bangladesh produces only 150,000 bales. For textile industry Bangladesh imports over 5.0 million bales of cotton every year. The cultivation of Bt cotton will have a significant impact on the economy of the country, as cotton is the dominant import. It is used in the clothing industry which is responsible for the bulk of the country’s exports, reports www.geneticliteracyproject.org. Bangladesh is the second largest exporter of apparel and clothing after China. In 2015 when Bt cotton trials began, Cotton Development Board (CDB) Executive Director Farid Uddin predicted GM cotton would be in the hands of farmers in three years.
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