The LGRD ministry has asked Bangladesh Bank not to oppose the establishment of Palli Sanchay Bank (PSB), a bank proposed to encourage rural savings.

Rural Development and Cooperatives Division of the ministry recently wrote a letter to the central bank governor in this regard, said officials.

Bangladesh Bank is opposed to PSB as “such specialised banks already in operation have not succeeded in their objectives.”

Finance Division is also against the PSB since the country already has some of such banks.

The letter was signed by Patit Pabon Devnath, Assistant Secretary to the Rural Development and Cooperatives Division, which called for no-objection from the central bank to set up the PSB.

Today, Banking Division has called a meeting on the issue at its office in Dhaka.

Officials of Rural Development and Cooperatives Division will also be present at the meeting to be presided over by the Finance Minister AMA Muhith, said official sources.

Bangladesh Bank and Banking Division are suggesting the establishment of a microcredit institution instead of launching Palli Sanchay Bank.

The rural division letter said the future beneficiaries of PSB have already expressed grievance over the central bank’s decision.

It said the people will soon “demonstrate against the central bank” for allowing the establishment of PSB.

Cooperatives Division said principal secretary Sheikh Md Wahid Uz-Zaman talked to the central bank governor over phone on the issue.

The letter read cooperatives division has already taken preparation to turn “One House One Farm Project” to the PSB as the number of projects’ beneficiaries has exceeded 1m.

At an inter-ministerial meeting last month, Bangladesh Bank and Banking Division issued their oppositions to the setting up of the PSB.

Officials of Rural Development and Cooperatives Division were also present at the meeting.

The Cooperatives Division already prepared a draft Palli Sanchay Bank Act 2013.

But the central bank and the banking division officials ruled out the possibility of any such law to be made during the tenure of the present government.

The Cooperatives Division is however adamant at their stance to set up a specialised bank.

Bangladesh Bank said such specialised banks have not been successful in Bangladesh and the PSB would also not be viable.

Last month, Prime Minister Sheikh Hasina announced that the government will establish Palli Sanchay Bank to improve rural economy encouraging the people to rural savings.

She was inaugurating the digital banking service for the rural poor people. The function also distributed national awards on “One House One Farm” project.

“We’ll have to convince the Banking Division,” she said.

Sheikh Hasina added that the “One House One Farm Project” was showing a new path towards poverty alleviation. 

News:Dhaka Tribune/06-Nov-2013

The committee of secretaries on Tuesday submitted recommendations to the finance minister regarding a separate pay scale for the employees of the Bangladesh and the four other state-owned commercial banks.

Sources said after the finance minister has given his consent, the recommendations would to the prime minister.

The employees of these banks, however, have been strongly opposing the proposal for separate pay scale saying the general pay scale for the government employees is better for them.

An official of the banking division of the finance ministry said: “Most employees of the state-owned commercial banks Sonali, Janata, Agrani and Rupali and the Bangladesh Bank expressed fears that they would not be able to take enough money back home, resulting in a fall in their living standards. Because under the separate pay scale, they would have to pay income taxes and there would not be some of the key bonuses and allowances.”

Finance Minister AMA Muhith on Tuesday said the government would simultaneously implement the national pay scale for government employees and the separate one for the government banks.

Dr Aslam Alam, secretary of the finance ministry’s Bank and Financial Institutions Division, told Dhaka Tribune: “Implementing the separate pay scale will take time because of two reasons: firstly, most of the employees of Bangladesh Bank and the state owned commercial banks are opposing the move as they want to stay under the purview of the national pay scale.

“Secondly, the Bangladesh Bank is currently under the national pay scale. It will have to come out of that for enabling the implementation of the separate pay scale.

“I have talked to the employees of the state-owned commercial banks and the Bangladesh Bank. They have told me that they were wondering why the government was thinking about implementing a separate pay scale hastily.”

He added that the implementation would not be very easy because the proposed separate pay scale had some issues that needed to be solved.

The committee of secretaries, headed by Cabinet Secretary Musharraf Hossain Bhuiyan, last month decided that the employees of the government banks would have to pay income taxes and their salaries would rise by Tk2,000.

However, the finance minister had hinted before that the government bank stuffs would get a much bigger hike.

At present, the four government commercial banks have 90,000 employees, while the central bank employs about 6,000, sources said.

News:Dhaka Tribune/06-Nov-2013

Bangladesh Bank (BB) is preparing a guideline to help banks check forgery in online banking.

The new guideline is likely to be issued next month, a central bank official told BSS on Sunday.

The central bank is issuing the guideline against the backdrop of some incidents of credit card forgery and fraudulent transactions at ATMs.

Under the guideline, banks will be advised to follow a set of measures to protect their clients from fraudulent activities in online transactions.

Among the measures, the banks would be asked to develop a system from which their clients would get instant message (SMS) and email immediately after each and every online transaction.

Currently, some banks are providing similar services at their own initiatives to protect the interest of their clients and to ensure secured online banking.

“But, all banks should provide their clients with similar services after issuing the guideline,” the BB official said.

He said SMS and email should be sent to the respective clients against their transactions by using debit or credit cards at the ATMs (automated teller machines) or PoS (Point of Sales). 

News:Dhaka Tribune/04-Nov-2013

Most of the country’s commercial banks have showed positive earnings for the third quarter (July-September) of this year, but their cumulative earnings in three preceeding quarters (January-September) were negative.

Out of 30 listed banks, 28 have so far declared their third quarter earnings – 15 showing positive earnings, few of them even recovering from heavy losses of the same quarter previous year, according to published earnings statements.

Nine of them made a profit this quarter, but this was dlown from the same quarter of the previous year while the remaining four incurred net losses.

During the nine month period of this year, the cumulative earnings of 21 companies, however, still remained in the negative territory with only seven showing very marginal profits.

The banks continued to wrestle with the rising non-performing loans stemming mainly from the country’s ongoing political uncertainty, bankers said.

Political uncertainty, which discouraged private investment, and higher provisioning against non-performing loans (NPL) hit profitability, they said.

NPL is a loan on which the borrower is not making interest payments or repaying any principal. Banks normally set aside money to cover potential losses on loans (loan loss provisions) and write off bad debt in their profit and loss account.

Spillover effects of bad loans, which started to shoot up from last year following a series of financial scams, continued this year too, bankers said. The situation might turn worse in the coming months because of deepening political chaos they warned.

National Bank Ltd (NBL) was the worst performer posting a net loss of almost Tk4bn for the nine months ending September 30, down from the Tk1.3bn profit in the same period of 2012.

NBL was followed by Mutual Trust Bank, Exim Bank and One Bank.

“Political uncertainty holds back overall businesses, bringing down the banks earnings,” said Helal Ahmed Chowdhury, managing director of Pubali Bank. “Though economic growth remained positive over the last several years  credit growth was not encouraging.”

On bank to bank varying profit, he said the banks that had to keep aside smaller amounts of money for loan provisioning or recovering previous bad loans posted higher profits. “The banks with higher non-performing loans made less profit.”

He said the banks awash with huge liquidity had to face the increased cost of funding, which also brought adverse impact on net profit.

The banks’ income mainly comes from two areas, core banking and capital market investment.

According to the Bangladesh Bank data, defaults on loans in the banking sector increased by more than 19% to Tk510bn as of March 31, 2013 from December last year.

Private borrowing grew by over 11% in August this year compared to about 20% in the corresponding month of last year.

Ali Reza Iftekhar, managing director of Eastern Bank, said higher provisioning due to rising NPL is the main reason behind the fall in net profits. “The business was very bad, so the profit was not satisfactory. Some even recorded higher profits. But the large provisioning has eaten up all the profits.”

He said: “This, coupled with the bearish trend of the stock market, has forced the banks to provision a substantial amount, which has cut the profit.”

Iftekhar sees more difficult days ahead in the run up to the general election. “Banks might see worse days in the coming months because of intensified political chaos.”

Banks that saw decline in their profits are First Security Bank, Al-Arafah Bank, AB Bank, Social Islami Bank, Eastern Bank, Trust Bank, Dhaka Bank and Islami Bank.

Banks that saw positive in their profits are United Commercial Bank, NCC Bank, Premier Bank, Jamuna Bank, City Bank, Bank Asia, Uttara Bank, Rupali Bank, Pubali Bank, Dutch-Bangla Bank, Mercantile Bank, Southeast Bank, IFIC Bank, Prime Bank and Shahjalal Bank. 

News:Dhaka Tribune/03-Nov-2013

Bangladesh Bank Governor Dr Atiur Rahman stressed the need to prepare sector specific credit policy guideline as “the nature of different sectors is different from the environmental perspective.”

He also said holding positive mindset and attitude on environmental credit guideline is the biggest challenge for the bankers.

Dr Atiur Rahman was speaking at “International Sustainable Banking Conference 2013” in Dhaka on Saturday.

Bangladesh Bank and International Finance Corporation jointly organised the day-long conference.

“Polluting industries like tannery differs from the investment in poultry,” said the governor explaining the nature of the lending sectors.

He added that quantifying environmental risk rating is another challenge.

On mindset, Governor said: “The mind-set amongst bankers should not be that environmental guidelines are damaging for growth of the business and a hindrance it’s in your own interest too for long run growth of your profits.”

“Capacity building on environmental issues is therefore required for the central bank and the commercials banks” to develop structured green banking practices and green reporting initiatives (GRI).

The green banking has been identified as one of the major drivers of sustainable economic growth in developing countries.

Governor said Bangladesh Bank’s Corporate Social Responsibilities (CSR) mainstreaming guidance of 2008 highlighted environmental sustainability issues alongside those of social and financial inclusion.

This was followed by indicative policy guidelines of 2011 specifically on instilling green banking practices, both in internal processes and in environmental impact assessment of financing proposals, he pointed out.

“Bangladesh Bank as a central bank took utmost care to kick the process off with setting examples in its own practices.”

Dr Atiur Rahman said: “In green financing lenders routinely take up environmental impact assessment of investment proposals, factoring in environmental risks in their financing decisions.”

He added the green financiers deny financing for environmentally risky undertakings lacking in adequate mitigation measures.

“This environmental screening of borrowing proposals, green financing promotes adoption of new energy efficient.”

Governor said Bangladesh Bank advises the banks to finance solar energy,bio-gas plant, ETP and Hybrid Hoffman Kiln (HHK) in brick field under refinance programmes.

“We introduce Tk2bn refinance line in FY2010 against bank loans for investments in solar energy, ETPs and biogas plants,’ he added.

Kyle Kelhofer, IFC’s Country Manager for Bangladesh, Bhutan and Nepal and Deputy Governor SK Sur Chowdhury, among others were present.

News:Dhaka Tribune/03-Nov-2013