Private sector credit growth in September falls slightly
Private sector credit growth fell slightly again in September mainly due to lower payment obligations particularly back-to-back imports for ready-made garment (RMG) sector, officials said. The growth in credit flow to private sector came down to 15.3% in September 2016 on a year-on-year basis from 16.2% a month ago, according to the central bank’s latest statistics. The private sector credit growth was 15.97% in July 2016. The total outstanding loans with the private sector rose to BDT 6801.4 billion in September 2016 from BDT 5896.9 billion during the same of the last calendar year. It was BDT 6719.4 billion in August 2016. The official further said such credit growth also dropped due to long Eid vacation in September. “We expect that the credit growth may pick up in the month of October following upward trend in imports,” the central banker noted. The actual import in terms of settlement of letters of credit (LCs) stood at USD 1.4 billion in the first two weeks of October. The value of opening of LCs, generally known as import orders, was USD 1.5 billion, the BB data showed. The settlement of LCs fell by more than 13.0% to USD 2.99 billion in September 2016 from USD 3.4 billion in August. On the other hand, the opening of LCs also decreased by 7.4% to USD 3.53 billion in September from USD 3.8 billion in the previous month.
Country’s scheduled banks cut their rates of interest on lending further in September, for the 21th month in a row, against the backdrop of the businesses’ persistent reluctance to borrow from banks due to a sluggish business situation, said Bangladesh Bank officials. BB data showed that the weighted average interest rate on lending in the banking sector declined to 10.15% in September from 10.24% in August. A BB official told New Age on Thursday that the banking sector was forced to lower the lending rates due to a sluggish credit demand from the businesspeople. The BB data showed that the weighted average interest rate on deposit of the banks also decreased to 5.39% in September from 5.44% in August. The weighted average interest rate on lending was 10.32% 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 this year. The rate had declined throughout last year. From 12.32% in January 2015, it had dropped to 11.18% in December 2015. The BB official said that the majority of the banks had recently cut their rates of interest both on deposits and lending in the face of dull business.
Jute millers now get three more years to repay loans in block account
The central bank has extended the loan repayment period of block account for both public and private jute millers by three years more, officials said. Under the relaxation, the millers are now allowed to repay their loans which have already been transferred to the block account by eight years instead of five years earlier, according to a circular, issued by the Bangladesh Bank (BB) on Wednesday. The BB also instructed the commercial banks to keep the rate of interest on block account based on their cost of funds. The central bank has taken the latest measure in line with the request of the Ministry of Textiles and Jute. According to the Bangladesh Jute mills Association (BJMA), private jute millers are now paying 10.0% interest on block account loans.
Two-thirds of banks faced financial crimes in last two years: Bangladesh Institute of Bank Management study
Almost two-thirds of commercial banks in the country faced some forms of financial crimes over the last two years, a research study has revealed. Among these crimes, cheque-related frauds are most common, said the study conducted by Bangladesh Institute of Bank Management (BIBM). The findings were revealed during a research workshop on ‘Addressing Financial Crime in the Banking Sector of Bangladesh’ in the capital on Thursday. “About 65.0% of the banks sampled in our study said they faced deposit account-related financial crime incidents in their banks during the period from 2014 to 2016”, said Dr. Shah Md. Ahsan Habib, Professor and Director of BIBM. The study observed that although 35.0% of the banks surveyed as part of the research said they did not face any such crimes during the aforementioned period, it is not unlikely that the banks were shy to disclose such information. According to the BIBM study, 60.0% of the banks surveyed said they faced cheque-related financial crimes during the last two years out of which around 46.0% of this type of frauds was committed in the form of fake cheques. The study also noted that about 65.0% of the banks surveyed said they faced loan-related financial crimes in their banks during the aforesaid period out of which 38% was committed by taking loan in the name of non-existent or fake borrowers.
Net sales of savings instruments continue to post robust growth this fiscal year riding on the higher returns than its alternatives. Bangladesh Bank data shows net sales of savings tools stood at upwards of BDT 116.5 billion during the July-September quarter, up 74.4% year-on-year. Over BDT 38.5 billion worth of savings certificates were sold in September this year, up by a whooping 88.0% from a year earlier. BB officials and commercial bankers attributed the growth to the returns the government offers for investments in savings tools. Investors were lured in by the interest rates, which are 5-6% percentage points higher than those offered by commercial banks on term deposits. But BB officials and bankers said the higher rate of returns is not only distorting the market but also creating interest payment burden on the government, which can lead to a mismatch in treasury management. The net sales of savings certificates were more than double the target set by the government for fiscal 2015-16: it stood at BDT 336.9 billion — the highest in the country’s history — against the target of BDT 150.0 billion. The government sold savings instruments of BDT 287.3 billion in fiscal 2014-15, while the amount was BDT 117.1 billion the year before. In fiscal 2012-13, the total sales of the instruments were a meagre BDT 7.7 billion. The interest rate on the five-year family savings certificates has been brought down to 11.52% from 13.45%, according to a notice of the Internal Resources Division. The five-year pensioner savings schemes saw its interest rate slashed to 11.76% from 13.19%.
Growth of insurance sub-sector in terms of country’s gross domestic product (GDP) was marginal in the fiscal year (FY) 2015-16. Official data showed the sub-sector’s growth fell to only 0.54% in the last financial year (FY), 2015-16, from a level of 3.95% in the previous fiscal. Bangladesh Bureau of Statistics (BBS) in its final data on the GDP showed volatility in the insurance sub-sector’s growth in recent years. According to the BBS reckonings, the growth rate of the insurance sector was 3.69% in the FY2011, and increased to 4.41% just the following fiscal year (FY2012). In the subsequent FY2013, the growth hurtled down to only 0.61% –and once again moved up to 1.55% in FY2014 on its bumpy ride. Founder of Bangladesh’s leading insurance firm, Green Delta Insurance Company, Nasir A Choudhury said the insurance industry was passing through bad times as its operational costs were much higher compared to premium it was getting from clients. Officials said the country’s 43 insurance companies had spent an additional BDT 14.5 billion as operational cost over their limits in the last seven years. Experts said although the government six years ago established a dedicated regulatory authority — the Insurance Development and Regulatory Authority (IDRA) — it could so far do little to bring the country’s insurance companies onto track.
Bangladesh Securities and Exchange Commission (BSEC) to set up capital market education academy
The Bangladesh Securities and Exchange Commission will form a separate academy, Bangladesh Academy for Securities Market (BASM), to conduct country-wide education on capital market. A BSEC official said BSEC has recently finalized rules on investment education promotion and training, which are waiting to be published as gazette notification. The capital market regulator on October 30 finalized the rules titled Bangladesh Securities and Exchange Commission (Investment Education Promotion and training) Rules, 2016 after receiving public opinion till October 2. Speaking about the necessity of forming separate academy despite having Bangladesh Institute of Capital Market, the BSEC senior officials told New Age that the institute was Dhaka-centric and only dealt with training professionals. As government has imitated to run nationwide financial literacy programme, forming a separate entity that will be dedicated to educate common people had become important, they said. The finance ministry has agreed with the BSEC about the necessity of having a separate academy to run nationwide financial literacy pregame. Under the finalized rules, the academy apart from giving different training to the investors will also be allowed to run different certified courses including diploma and post-graduate causes.
The government spending on fuel oil is set to dwindle further as suppliers offered cheaper rates in their bids in response to an open tender floated recently. Nine international firms quoted their prices to win contracts and supply refined fuel to Bangladesh Petroleum Corporation (BPC), a senior BPC official said. Emirates National Oil Company (ENOC), Unipec Singapore Pte Ltd, Petro China, SK Energy, Vitol Asia, Swiss Singapore Overseas Enterprises Pte Ltd, Glencore and Trafigura were among the bidders. Premium rate is a component of oil-pricing mechanism under CFR (cost and freight) basis which includes the costs of fuel freight, insurance and evaporation as well as loading and unloading losses. The offer will be valid for 75 days until January 13, 2017. The BPC’s spending in import of petroleum products during fiscal year (FY) 2015-16 was USD 1.9 billion, which was USD 3.5 billion in the previous FY 2014-15, BPC officials said. The BPC had floated the international tender on October 20 to import around 1.175 million tons of 0.05% sulfur gasoil (diesel), jet A-1 fuel and 180 CST (centistokes) high sulfur fuel oil (furnace oil) combined during first half of 2017. Of the fuel to be imported, 965,000 tons are diesel, 120,000 tons are furnace oil and 90,000 tons are jet A-1 fuel. This was the BPC’s second tender to import refined petroleum products through open tendering in the past nine-months.
Public servants’ pension scheme to undergo changes in FY ’18
The government has planned to reform the existing pension scheme that would bar the retired public servants from withdrawing more than half the gross pension money at one go. The remaining half would be retained and paid on monthly basis with annual increment. The Ministry of Finance (MoF) has prepared a formal proposal, which is expected to be placed before Prime Minister Sheikh Hasina within the next couple of days, a senior official told the FE. The scheme aims at ensuring post-retirement financial security of the government employees, which in turn is expected to reduce government’s annual spending worth around BDT 8.0 billion on pension payments. Currently, the retired employees have the option for drawing up to 100% of their gross pension money at one go. One-fifth of them now draw the entire amount immediately after their retirement, said the official, revealing a MoF survey result. But most of them failed to utilise the money efficiently due to lack of investment knowledge, financial illiteracy and inadequate investment opportunities. Many also spent their money in unproductive sectors while some had to hand over the money to the family members, resulting in miserable living afterward. Some, however, could invest the money in comparatively secured sectors like national saving scheme and fixed deposit receipt (FDR) with the commercial banks. But the interest rate against national savings schemes, which now ranges between 10.0% and 11.3%, is now falling. Besides, the liability of providing benefits against such scheme goes to the government.
The government is creating a ‘land bank’ of 100,000 acres to help domestic and foreign investors set up their factories without any hassle in Bangladesh, said Abul Kalam Azad, principal secretary to the prime minister, yesterday. The 100,000 acres would include the special economic zones that the government plans to set up. The land application law will be amended in two to three months to give land owners more compensation than they currently get, he said at a program organized by the Public Private Partnership Authority at the capital’s Sonargaon Hotel. The PPP Authority signed preliminary agreements with 14 lenders on PPP financing partnership. As per the agreements, the PPP Authority will send tender documents to the 14 banks and non-bank financial institutions before awarding the contracts so that lenders can analyze whether the projects will be financially viable for them. Land is a big problem in Bangladesh, so the government has decided to amend the land application law, Azad said. The proposal is likely to be placed before the cabinet next week.
Tax fair rakes in BDT 14.2 billion in five days, National Board of Revenue says
Tax fair raked in a total of BDT 14.2 billion in taxes in the first five days, as visitors flocked to the venue over the weekend to complete their tax-related tasks, according to the National Board of Revenue. The five-day collection is 6.0% higher than last year’s, the tax authority said in a press release yesterday. The annual show, whose popularity has been steadily rising since its introduction in 2010, has been taking place at the under-construction headquarters of the NBR at Agargaon in Dhaka and other divisional cities since November 1. The tax authority also organised the show for four days in district towns, for two days in 29 upazilas and for one day in 57 upazilas through mobile trucks. Yesterday, the NBR held the show in 48 districts, including Dhaka and 14 upazilas, which altogether had a foot count of 1.55 lakh, said the NBR. “It was really a very good experience. Everyone there was in the mood to help, which I did not get when I had visited the tax office,” said Md Saiful Islam, who visited the tax fair for the first time on November 4. Islam submitted his return and also collected his user ID and password for accessing the online tax return filing system, which was launched last week.
Bangladesh’s garment exports to the US increased slightly in the first nine months of 2016, according to data from the US Department of Commerce. Between the months of January and September, USD 4.32 billion worth of garment items were shipped to the US, up 0.32% year-on-year. However, garment import by the US dropped 6.25% year-on-year to USD 80 billion during the period. Among the top 10 garment exporters to the US, only shipments from Bangladesh and Vietnam increased slightly during the period. Vietnam exported USD 8.61 billion of garment items to the US, up 0.01% year-on-year. Apparel exports from China, the largest garment exporter to the US, declined 10.97% to USD 29.42 billion, from India by 0.77% to USD 5.57 billion, from Pakistan by 10.44% to USD 2.05 billion and Mexico by 5.53% to USD 3.32 billion. Garment exporters and market analysts said American garment imports from all over the world declined mainly due to the US general election, which has consumed the general public. On the other hand, overall exports from Bangladesh to the US in September declined 6.56% to USD 497.8 million from the previous month. In the January-September period, total exports to the US, the single largest export destination for Bangladesh, stood at USD 4.63 billion, while total imports from the US were USD 681.6 million.
Bangladesh internet users soar to 23.1 million in 2015: Asian Development Bank (ADB)
The number of internet users in the country increased significantly to 23.09 million in 2015 from only 94,000 in 2000, Asian Development Bank (ADB) in its latest report said on Thursday. ADB said 14.4% of the total population in the South Asian country used internet in 2015 from 0.1% in 2000. These were mentioned in the report – “Key Indicators for the Asia and Pacific 2016” – launched from its headquarters in Manila on Thursday. The key indicators present statistics on development issues concerning Asia-Pacific, and include the latest available economic, financial, social, and environmental indicators for ADB’s 48 regional members. An ADB press release on the report said despite decades of sustained growth, 330 million people in Asia-Pacific are still living on less than USD 1.9 a day. According to ADB, across the region 2.7 billion people are still living without access to safe drinking water, although nine out of ten now have access to electricity. The Manila-based lender in its indicators mentioned that about 1.5 billion people lack access to proper sanitation. Broadband internet subscriptions have increased in 45 out of 47 reporting economies between 2000 and 2015, but 58.0% of the region’s population remain unconnected to the internet. Asia-Pacific generated two-fifth of global GDP (Gross Domestic Product) at 2015 purchasing power parity (PPP), the Manila-based lender’s latest indicators showed. ADB said the GDP share of manufacturing has increased in 16 out of 48 member countries from 2000 to 2015. In nearly three-quarters of the economies of Asia and Pacific, the service sector accounts for more than 50.0% of GDP. The region accounts for roughly 45.0% of global energy use, it added. Government spending on health as a percentage of GDP has increased in about two-thirds of the region’s economies since 2000.
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