Banks’ capital base weakens in Q2

The capital base of banks has weakened slightly, but remains at a comfortable level, in the April-June quarter (Q2) of this year mainly due to increased non-performing loans (NPLs). The overall capital-to-risk weighted assets ratio (CRAR) of all the banks operating in the country came down to 10.3% in Q2 from 10.6% in Q1 (January-March), according to latest statistics of Bangladesh Bank. Officials said increased credit growth, particularly in the private sector, coupled with higher NPLs pulled down the overall CRAR. The private sector credit growth rose to 16.8% in June 2016 (year-on-year) as compared to 15.6% in April this year. The NPLs rose to BDT 633.7 billion in the quarter from BDT 594.1 billion in Q1. The total regulatory capital increased by BDT 12.7 billion to BDT 768.9 billion during the April-June quarter from BDT 756.12 billion in Q1. However, the overall capital shortfall stood at BDT 6.4 billion as on June 30 as compared to BDT 10.8 billion surplus in Q1 ending in March due to regulatory requirement of increasing the banks’ capital to comply with the Basel-III conditions.

Source:
http://print.thefinancialexpress-bd.com/2016/09/27/152673
http://newagebd.net/253657/9-banks-face-BDT-16657cr-capital-shortfall/

Government forms BDT 2.7 billion Two Step Loan (TSL) refinancing fund for RMG units

The government has formed a Two Step Loan (TSL) refinancing fund in Bangladesh Bank (BB) to strengthen building safety of garment factories through short to long-term finance. Ready-made garment (RMG) units in Dhaka, Narayanganj, Gazipur and Chittagong will get financial assistance from the fund with an interest rate not exceeding 6.0% under Urban Building Safety Project (UBSP), financed by Japan International Cooperation Agency (JICA). The central bank issued a circular on Sunday to this effect, stating that the principal component of TSL fund is 4.129 billion Japanese Yen (BDT 2.68 billion). Under UBSP, JICA will give the concessional ODA loan to the government for provisioning of TSL to use for private sector building safety. TSL will be given to the participating financial institutions (PFIs), which would then re-lend the fund to end-borrowers. Under the special fund, PFIs will be provided with refinance or pre-finance for lending to ensure building safety of RMG factories for short to long-term duration.

Source:
http://print.thefinancialexpress-bd.com/2016/09/27/152675
http://newagebd.net/253646/rmg-unit-get-BDT-35cr-jica-fund/

State banks must not be recapitalized

The government should not recapitalise the state banks even if they continue to suffer from soaring defaults, experts said yesterday. People who are politically connected have taken significant amount of loans from the state-run banks, and the majority of them have become defaults, said AB Mirza Azizul Islam, a former adviser to the caretaker government. “They took the loans for one purpose and then used the funds for something else, violating the regulations.” Islam’s comments came at the International Conference for Bankers and Academics 2016, jointly organised by the Bangladesh Institute of Bank Management and the Australian Academy of Business and Social Science. The two-day event, which was attended by local and global experts, ended yesterday. The loans given to big borrowers usually end up as defaults, so the banks should focus more on small borrowers, he said. “The banks favoured selected clients to restructure the loans — they should now recover the loans under the legal procedure.” A large number of cases are now pending with the court, he said. Islam also touched upon the interest spread rate: he said it should be decreased to 3 percent from existing 5 percent.

Source: http://www.thedailystar.net/business/state-banks-must-not-be-recapitalised-analyst-1290139

AMCs, trustees to place MFs’ tax issue before MoF, NBR

The securities regulator has asked the asset management companies (AMCs) and the trustees to work together for solving complexities regarding the newly-imposed tax on mutual funds (MFs) through discussion with the authorities concerned, officials said. The regulatory instruction came on Monday at a meeting held at the office of Bangladesh Securities and Exchange Commission (BSEC). Representatives of different AMCs and trustees attended the meeting, chaired by BSEC commissioner Professor Helal Uddin Nizami. “At the meeting, the securities regulator instructed the AMCs and the trustees to place the issue before the authorities concerned,” said an AMC representative. He also said the AMCs and the trustees may take the issue to Ministry of Finance (MoF) and National Board of Revenue (NBR). Another AMC representative said the complexities regarding the newly-imposed tax on the MFs emerged following a circular of NBR. He said as per the circular, the MFs will have to pay 5.0% tax on interest of the amount, kept in bank account for investment purpose. “The MFs may not incur profit from all investments. So, their return will decline, if tax is deducted from any amount, kept in bank account.” He added that a MF will have to pay tax at source during its liquidation, considering the face value of BDT 10 as cost price.

Source: http://print.thefinancialexpress-bd.com/2016/09/27/152679