Deputy Governor of Bangladesh Bank SK Sur Chowdury speaking at a workshop organised by Eastern Bank Ltd. (EBL) for its senior management on Corporate Governance in the city on Monday. Among others, Managing Director and CEO of EBL Ali Reza Iftekhar and Corporate Governance Specialist of IFC Lopa Rahman were present at the workshop.

The central bank is set to introduce a Real Time Gross Settlement (RTGS) system on October 8 to facilitate the business activities across the country, officials said.

"We've already directed all the commercial banks to take preparations for implementation of the RTGS as per our timeline," a senior official of the Bangladesh Bank (BB) told the FE Tuesday.

The BB also asked the participating banks to submit their RTGS implementation plans to it by April 23, the official added.

He said India, Pakistan and Sri Lanka have already introduced the RTGS system so that businessmen can quickly provide services for high-value transactions.

Earlier on November 20 last year, the central bank signed a deal with Sweden-based CMA Small Systems AB to introduce the RTGS system.

The RTGS, which can be defined as the continuous (real time) settlement of funds transfers individually on an order by order basis (without netting).

'Real time' means the processing of instructions at the time they are received rather than sometime later. 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis).

Bangladesh Bank is set to introduce the real-time gross settlement (RTGS) system on October 8 to facilitate instant settlements of payments online.

RTGS is a system of transferring money or securities from one bank to another on a real-time or 'gross' basis. It is part of a project jointly funded by the government and the Asian Development Bank.

Real-time settlement means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. Gross settlement means the transaction is settled on a one-to-one basis without bundling or netting with any other transaction.

It enables the instant settlement of high-value, local currency transactions as well as government securities and foreign currency-based transactions, the BB said in a statement yesterday.

Under the present system, such transactions sometimes take more than a day to come through.

“All scheduled banks are required to take preparation to perform live transactions over the BB-RTGS system,” the BB said.

The RTGS will use MX (ISO 20022) message format for data exchange between central bank's systems and participating bank's systems through the existing virtual private network.  “The SWIFT network may be included as a redundant communication channel in the next phase.” 

The BB has also directed banks to complete installation of necessary hardware and software to introduce RTGS by August 17.

In line with the timeframe, participating banks will prepare their implementation plan and submit to the central bank by April 23.

Bangladesh Bank on Monday asked four state-owned commercial banks to explain in their annual financial balance sheets why their position of capital and provision strengthened last year. The four banks are Sonali, Janata, Agrani and Rupali. The BB asked the banks to prepare the balance sheets by this month as they failed to do those by February in line with the central bank directions. Monday’s directions came from a regular memorandum of understanding meeting between the BB and the state-owned banks at the central bank headquarters in the capital. BB governor Atiur Rahman presided over the meeting while the managing directors of the banks were present. The BB arranges the MoU meeting in every three months to supervise and monitor the banks’ financial health. BB deputy governor SK Sur Chowdhury after the meeting told reporters that the capital and provision of the banks strengthened last year as the central bank had relaxed provisioning against the loans which are pending with the Artha Rin Adalat. The central bank has recently asked the banks to keep provision in phases against the loans which are pending with the court that resulted in stronger capital position of the banks. The BB asked the banks to attach the information with the balance sheets. Sur said that the central bank had asked the four banks to strengthen the recovery programmes from the habitual and big defaulters as some of them (banks) failed to achieve the recovery of the defaulted loans in accordance with the central bank target. He said, ‘Rupali Bank exceeded the credit growth target set by the central bank in 2014. So, the BB asked the bank to give explanation in this connection.’ The central bank set the credit growth target for the four banks from 2013 in a bid to check their loan scandal. The BB asked the banks to strengthen their internal control and compliance in the interest of their good governance, Sur said. The BB asked the banks to take punitive measures against the officials who were responsible for the loan scandals.