Rising NPL in SME sector
Almost everyone wanted the banks to make available more loans to the small and medium enterprises (SMEs) that are seen as key drivers of the country’s economy. But the current state of loan situation involving banks and SMEs is quite confusing. Some banks have beefed up their SME-loan disbursement in recent years and many others are still lagging far behind. A few banks are found to be hyperactive as they have overshot their respective annual targets as far as disbursement of SME-loan is concerned. But what has alarmed many is the abnormal rise in the volume of non-performing loans (NPLs) in the SME sector in recent years. Statistics made available in a paper presented at a seminar in Dhaka early this week showed that the volume of NPLs in the SME sector had increased more than eightfold to Tk 220 billion between 2010 and 2016. In line with the performance of their overall loan operations, the rate of NPLs in areas of SME loans in the case of state-owned banks is very high –40 per cent for commercial banks and 35 per cent for specialized ones. In case of a few private banks that have expanded their SME loan portfolio aggressively, the NPL situation is also pretty bad, if not critical like that of their public sector counterparts.
BB rejects proposals for two new banks
The central bank has turned down proposals for setting up two new commercial banks on the grounds that the deteriorating financial health of many banks, especially the nine that were last set up, does not warrant any new addition to the landscape. The Bangladesh Bank has communicated its decision in September to Finance Minister AMA Muhith, who had asked the central bank to scrutinise the proposals. One of the proposed banks is Bengal Bank, initiated by Bengal Group of Industries, a local manufacturer of plastic products. Morshed Alam, a ruling party lawmaker, is the chairman of the group. The other bank is Peoples Islami Bank, proposed by MA Kashem, a Chittagong-based businessman.
BB vigilantism squeezes banks’ stock-market business
Commercial banks’ stock-market subsidiaries lament that their activities on the capital market got squeezed for alleged arm twisting through central bank’s prohibitive watch against overexposure. Operators of the subsidiaries and their parent organisations said such shrinkage in their stock-business operations stems from the Bangladesh Bank’s monitoring over the banks’ share-market-exposure limits on consolidated basis. Several subsidiaries said despite the banks’ share-market exposures remaining within the stipulated limit as per the law governing bank companies, the central bank further issued a circular regarding the monitoring of exposure on consolidated basis that combines banks and their subsidiaries’ accounts on stock market operations in calculating.
New ‘code of conduct’ for banks, NBFIs
The central bank has circulated a ‘Code of Conduct’ for all banks and non-bank financial institutions (NBFIs) of the country with effect from January 1. All banks and financial institutions have been asked to adhere to the newly-formed guidelines by the Bangladesh Bank (BB). A BB circular in this regard was issued on Monday to ensure integrity and high ethical standards in financial sector in all of their day-to-day activities aligned with the government’s Vision 2021. Signed by BB General Manager Abu Farah Md. Nasser, the circular reads that the key objective of this code of conduct is to protect the interests of customers, owners, employees and stakeholders of all banks and NBFIs. It’s also been stated that the code of conduct will serve wider interests of the society as well. Another key objective of the BB guidelines, it said, is to promote fair competition among institutions and strengthen overall banking and financial environment in the country. The guideline is a minimum requirement but not necessarily limited to the instructions given. The banks and NBFIs can also develop the guidelines in line with their businesses. All listed banks, therefore, have been instructed to prepare their ‘Code of Conduct’ within December 31 this year, which must be in effect from January 1 next year.
Current account deficit widens to $1.79b
The country’s current account deficit widened further in the first three months of this fiscal year due to sluggish export earnings and higher import payments. In the July-September period of 2017-18, the deficit stood at $1.79 billion, which was $539 million in the surplus in the same period a year earlier, according to the central bank data. The current account also registered a deficit of $451 million in the first two months of this fiscal year. Strong import growth coupled with a moderate rise in exports contributed to the current account deficit, a Bangladesh Bank official told The Daily Star yesterday. In the quarter, imports rose 28.38 percent year-on-year while exports grew 7.70 percent, both of which resulted in the further widening of trade deficit. The current account registered a deficit of $1.48 billion in 2016-17 against a surplus of $4.26 billion a year earlier. The government should take up initiatives to increase the export earnings with a view to tackling the large current account deficits, Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, told The Daily Star yesterday.
Tk-10 accounts benefit farmers
The Tk-10 bank account enabled Md Abdul Khaleq to take a collateral-free loan of Tk 50,000 from a bank for the first time in life. “I used the money to harvest rice. My elder brother also remits money to me from abroad through the channel and I deposit my surplus money with the account,” he said. Khaleq said his economic activities increased threefold in the last three years. “It has been four years that I started using the account,” the farmer from Raomari of Kurigram told The Daily Star. In September of 2010, Bangladesh Bank instructed public banks to help the ultra-poor open the Tk-10 accounts so that they can get the benefits of the safety net programmes. Private commercial banks later followed suit of their state-owned peers. The use of the account has helped underprivileged people engage in various economic activities and change their lives. The marginal and landless farmers, small shop owners, hawkers and people affected by river erosion now take loans under a Tk 200-crore refinance scheme of the central bank by using the accounts for an interest rate of 9.5 percent.
AGENT BANKING: A boon for rural people
Banks are witnessing a faster growth in the number of female customer accounts than those of males under the agent banking network as the new channel is taking services to people’s doorsteps in remote areas. The number of accounts of females increased 99 percent to 316,916 in September from 159,149 in December last year while those of males grew 87 percent to 722,015 from 385,387. About 5 lakh agent banking accounts were opened in the first nine months of the year, reflecting the growing popularity of this new form of banking service. At the end of September, the number stood at 10.38 lakh, up from 5.45 lakh at the end of December last year, according to Bangladesh Bank data. As of September this year, the agent banking accountholders deposited Tk 922 crore against which three banks lent Tk 78.72 crore through the mini banking channel. Agent banking is a system of providing banking and financial services on a limited scale to the underserved population by way of agents under an agreement rather than a teller. The central bank decided to promote this complimentary channel to extend a range of banking services to the unbanked and underserved segments of society, especially in geographically dispersed locations, as well as existing bank customers.
Standard Bank executives sued for fund embezzlement
A businessman yesterday filed a complaint against three executives of Standard Bank for allegedly embezzling Tk 1.18 crore from his three bank accounts. Iqbal Karim Talukdar, owner of Karnaphuli Enterprise, filed the complaint with the court of Chittagong Metropolitan Session Judge Md Shahe Noor against the bank’s managing director, the regional manager and the CDA Avenue branch manager of Chittagong. The court ordered the deputy commissioner of the detective branch of the Chittagong Metropolitan Police to investigate the case and submit a probe report, according to the plaintiff’s lawyer Sanowar Ahmed Lavlu. No name was mentioned in the case statement except the position, the lawyer said. Lavlu said Standard Bank officials of Chittagong CDA Avenue branch allegedly embezzled the funds by forging Talukdar’s signatures and documents from February 10, 2010 to February 20, 2012. “After realising the matter, my client sent a written complaint to the bank seeking explanation. But the bank has not yet replied,” the lawyer said. However, the bank denied the allegation saying that Talukdar, who was a client of Standard Bank, filed false complaint against them. The bank had taken efforts to auction off the mortgaged properties of Talukdar when he defaulted on a loan, a top official of the bank said.
Foreign investment in stocks doubles in Jan-Oct
Foreign investment in stocks doubled year-on-year in the first 10 months of 2017 as overseas investors continue to show their trust in the market. Net position of foreign portfolio with the Dhaka Stock Exchange (DSE) stood at Tk 1,623.43 crore in January October, compared to Tk 800.47 crore in the same period a year ago. The steadily growing economy and matured market behaviour after the demutualisation of bourses encouraged foreign investors to put their money in stocks, said a senior executive of the DSE. Many foreign individuals and institutions are now showing interest to invest in Bangladesh’s stockmarket, said M Khairul Hossain, chairman of Bangladesh Securities and Exchange Commission, at a seminar in Dhaka recently.
Govt looks to make best use of 3rd Indian LoC
Agencies implementing projects under the latest Indian US$4.5 billion line of credit (LoC) will come under close scrutiny at a meeting to be held tomorrow (Thursday) to discuss the execution-related issues, officials said. Since some projects under the $862 million Indian LoC-I and $2.0 billion LoC-II are still struggling for execution delays, the government has made the move at the preliminary stages of the proposed 17 projects to be executed under the LoC-III, they said Tuesday. Different ministries have already taken up these projects to be implemented under the $4.5 billion LoC, confirmed last month. Economic Relations Division (ERD) will sit with the project-implementing agencies and their line ministries tomorrow (Thursday) to expedite the implementation process under the biggest Indian loan to Bangladesh. ERD Secretary Kazi Shofiqul Azam will preside. Meanwhile, different government agencies had already undertaken 17 projects well ahead of the signing of the LoC-III deal on Oct 4 for implementation.
July-Oct ADP spending ‘highest-ever’
The government agencies have spent 14.53 per cent of the Annual Development Programme (ADP) outlay in July-October period of this fiscal, one percentage point up from the rate in the corresponding period of last fiscal. The agencies have utilised Tk 238.35 billion funds during the first four months of Tk 1.64 trillion ADP allocations in the current financial year (FY), 2017-18. They spent Tk 167.72 billion or 13.60 per cent of the total Tk 1.23 trillion ADP outlay in the same period last FY. Planning Minister A H M Mustafa Kamal said these after a meeting of the Executive Committee of the National Economic Council (ECNEC) in the capital on Tuesday. The minister also said the ADP implementation rate during the last four months was the highest in the history of Bangladesh since there was no constraint. Presided over by Prime Minister Sheikh Hasina, the ECNEC meeting approved eight development projects, involving a total cost of Tk 49.79 billion. Of the eight projects, seven are new projects, while one is revised. Mr Kamal said: “Out of the total cost, Tk 40.69 billion will come from the national exchequer, while Tk 511.6 million from the government agencies’ own fund, and the remaining Tk 8.59 billion from the project assistance.” Among others, the meeting approved the Smaller water resources development project (2nd phase) at a cost of Tk 12.86 billion. The project aims at boosting agricultural production and increase income of farmers through enhancing non-farm activities. The Local Government Engineering Department (LGED) will implement the project in 220 upazilas under 29 districts in Dhaka, Mymensingh, Sylhet and Rangpur divisions by December 2023.
Mobile Number Portability Services to come in six months
The telecom regulator yesterday directed a joint venture to receive the licence to launch mobile number portability service in six months. The service will enable people to switch from one mobile operator to another without changing their 11-digit mobile numbers. Shifting from one mobile operator to another will cost Tk 30 and the service can be availed once in every three months. The joint venture formed by Infozillion BD Teletech Consortium Ltd, a Bangladeshi entity, and Teletech d.o.o, a Slovenian company, was notified about the licence by Bangladesh Telecommunication Regulatory Commission at a programme. “Though it is very late but at last we can embrace this modern service, which will help our market become more mature,” said Shahjahan Mahmood, chairman of the telecom regulator. It will help bring more competition to the market and enhance service quality, he added. The joint venture plans to make the service available by mid-March or April and invest around Tk 50 crore.