Bangladesh Bank issues guideline on commercial paper

Bangladesh Bank yesterday issued a guideline on commercial paper (CP) for banks to put in place a uniform procedure for this short-term money-market instrument. Banks are allowed to invest in CPs, provide credit enhancements to CP issuers and act as an issuing and paying agent of CPs as per the guideline. However, banks shall not issue CPs in any form or provide any guarantee for CPs. Banks will have to ensure that they have written guidelines approved by their board of directors for dealing with CPs. The net worth of the issuer should not be less than BDT 300.0 million as per the latest audited balance sheet and the net profit after tax shall be positive for the last three years, according to the guideline. The current status shown in the Credit Information Bureau report of the issuer company shall be ‘standard’ and have no track record of classified status for last two years. Before investment in any CP, banks should assess the issuer’s overall debt repayment capacity by taking into consideration the issuer’s liabilities with other banks and financial institutions to make sure that the issuer has the ability to repay. It also said the current ratio of the issuer must be at least 1:1 as per latest audited balance sheet and the debt-equity ratio of the issuer must be maximum 70:30 as per latest audited balance sheet.

Source:
http://www.thedailystar.net/business/bb-issues-guideline-commercial-paper-1289731
http://www.dhakatribune.com/business/2016/09/26/guidelines-commercial-paper-investment-banks/

BB seeks list of top written-off loan defaulters

Bangladesh Bank has sought the list of top written-off loan defaulters as the sum have already crossed Tk10,000crore-mark during last one year, official sources said. The authorities of the central bank sent a letter to the managing directors of all scheduled banks on Sunday, asking them to send the list of top defaulters. The MDs have been asked to submit the list with the BB authorities within seven working days, says the letter. The letter also asked for the financial statements of top 20 written-off defaulters.

Source: http://www.dhakatribune.com/bangladesh/2016/09/25/bb-seeks-list-top-written-off-loan-defaulters/

BIDA approves GPH term loan

The Bangladesh Investment Development Authority (BIDA), through its memo dated September 22, has approved term loan worth US Dollar 94,849,404.00 under Austria’s OeKB (Export Credit Agency – ECA). It has also approved deferred payment facility worth USD 5.9 million under the ECA, said a statement of the GPH Ispat Ltd. BHF Bank of Germany will sanction the loan through a consortium of five banks of Bangladesh. The term for repayment of the loan is 12 years and a half at the rate of interest at 1.4% plus six months Libor (London Inter Bank Offered Rate). Australian Primetals Technology GmbH is the deferred payment providing agency and the term of repaying this loan is six years and three months from the issuance of the Performance Acceptance Certificate. The GPH Ispat Ltd has informed the BSEC (Bangladesh Securities and Exchange Commission), DSE (Dhaka Stock Exchange and CSE (Chittagong Stock Exchange) of the loan acceptance approval.

Source: http://print.thefinancialexpress-bd.com/2016/09/26/152540

Higher NPLs widen interest spread: Bangladesh Bank study finds NPL net of

provisions to capital higher in BD than in India, SL
Non-performing loans (NPLs) net of provisions to capital in Bangladesh’s banking sector is higher than in India and Sri Lanka, which is also responsible for higher interest rate spread, experts and academics said. Among the three countries, the banking sector of Bangladesh scored higher NPL net of provisions to capital during the last five years, according to a Bangladesh Bank (BB) study, prepared by Ala Uddin and Shamima Sharmin. The research paper, styled ‘Banking Sector Soundness and Financial Stability: The Cases of Bangladesh, India and Sri Lanka’, was presented in a plenary session on banking at the two-day International Conference for Bankers and Academics (ICBA). Higher credit-portfolio loss serves as a stain in smooth financial intermediation process, according to the findings. Higher NPL ratio might serve as hindrances to reducing financial- intermediation cost in Bangladesh, the researchers explained. Banking sectors of both India and Sri Lanka are in a much better position in terms of capital adequacy, asset quality, and liquidity compared to those in the Bangladesh banking system, according to the paper.

Source:
http://print.thefinancialexpress-bd.com/2016/09/26/152570
http://newagebd.net/253402/defaulted-loans-fail-banks-lower-interest-rate/

CAPITAL MACHINERY: Banks asked to collect lifespan certificates before import

Bangladesh Bank on Sunday asked the country’s scheduled banks to collect lifespan certificates against capital machinery from foreign exporters when the local importers will open letters of credit to import such products. The BB issued a circular to the authorised dealer branches of all banks saying that age-old machinery, imported from abroad, was harmful for public health. Besides, the old-age capital machinery are not also environment friendly, the circular said. The BB issued the circular following a directive given by the commerce ministry on August 10. A BB official told New Age on Sunday that the commerce ministry and the BB had recently received a number of allegations that the importers had frequently imported old-age capital machinery from abroad.Such products are not also viable enough for the country’s industrial sector, he said. The BB also received allegations that a section of people have been laundering money abroad through the import of capital machinery by manipulating prices through under-invoicing.

Source: http://newagebd.net/253394/capital-machinery/

Research can help solve banking problems: analysts

The country’s banking industry is plagued by rising nonperforming loans (NPL), governance and internal control failures, liquidity gluts and slow credit growth, experts said yesterday. The problems can be addressed through rigorous studies and research, they added, speaking at a two-day international conference for bankers and academics at the Bangladesh Institute of Bank Management or BIBM. BIBM and Australian Academy for Business and Social Sciences jointly organised the programme attended by bankers, academics, researchers, practitioners and policymakers from home and abroad.

Source: http://www.thedailystar.net/business/research-can-help-solve-banking-problems-analysts-1289761

Conflict over insurance of public projects

As per the existing insurance laws of Bangladesh, any public property, moveable or immovable, has to be insured only with Sadharan Bima. After private players entered the insurance sector in the 1980s, Sadharan Bima’s monopoly on public property came under scanner. Later in 1990, a deal was signed between the Bangladesh Insurance Association, a forum of the private companies, and Sadharan Bima on insuring the public property. As per the deal, Sadharan Bima will solely issue insurance policy for public property but will share 50 percent of the premiums with the private insurers. This distribution of share will be equal among the private companies, no matter what the size of the company is. For example, premium earnings from public property insurance were nearly Tk 390 crore in 2015. According to the rule, Sadharan Bima got 50 percent of the premiums worth Tk 195 crore and the remaining 50 percent was distributed among 44 other non-life insurers equally, meaning that each company got about Tk 4.43 crore from public property insurance.

Source: http://www.thedailystar.net/business/conflict-over-insurance-public-projects-1289752