Bangladesh Bank (BB) is planning to form a new ‘temporary cell’ for effective supervision on nine new banks scheduled to enter the market during October-November period this year.

Officials said the central bank has taken the initiative aiming to ensure healthy competition in the banking sector as well as to shield the depositors’ money.

According to a proposal, at primary stage at present, the new cell will be comprised of skilled inspectors of the central bank and its duty will be to monitor whether new banks comply with the requirements as per regulatory guidelines.

Sources said the proposal was tabled at a meeting held Monday between the top executives of the central bank and the visiting delegation of IMF (International Monetary Fund) for discussion.

“Though it was not discussed in the meeting seriously because of time constraint, I think we must go for such initiative to monitor activities of new banks in order to ensure healthy competition in the sector,” said a BB high official, seeking anonymity.

However, another high official supplements saying, “It is too early. We will need to think of stronger supervision after new banks launches operation by fulfilling regulatory conditions.”

The central bank on April 17 last had issued letters of intent (LoIs) to nine newly-approved commercial banks, including three NRB (Non-Resident Bangladeshi) banks, and given six-month time limit to fulfill BB guidelines that will be ending on October 16.

The BB would award license to those who could fulfill the regulatory guidelines.

According to new guidelines, the BB allows maximum 20 directors in the bank boards instead of 13, as per existing provision. The paid-up capital of a new bank will not be less than Tk 4 billion, which will be provided by its sponsors.

An individual will not be eligible to apply as a sponsor of any proposed bank if he/she or any member of his/her family is or had been a loan defaulter with a bank or a financial institution at anytime during the past five years.

An individual awaiting verdict of any undisposed lawsuit in any court/tribunal against his/her loan default status will not be eligible to apply as a sponsor of the proposed bank, the guideline said.

The BB would check financial statements that contain source of income of the sponsored money, provided by new banks, by the National Board of Revenue whether the income was legal?

Meanwhile, the IMF delegation led by Deputy Division Chief of Asia and Pacific Department David Cowen arrived in the city on September 12 and had talks with various government agencies, other stakeholders and the central bank authority to evaluate the progress in implementing IMF recommendations to bring consistency between fiscal and monetary policies.

The delegation would compile a report to the meeting of the IMF board after wrap-up its visit on September 25, according to sources. The IMF last year had opposed licensing new banks but later altered its stance by saying that, “Allowing new banks may be justified if they (new banks) cover more people under banking services and strengthen healthy competition in the sector.”

Bangladesh secured $ 987 million loans under Extended Credit Facility programme of the IMF and the visit of its high-powered delegation is significant considering that its evaluation can make easy the delivery of second installment of the loan in November.

The country received the first installment worth $ 141 million in last May. The credit will be disbursed by the IMF under seven installments, each by end of every six months, upon satisfactory evaluation report.

News: Daily Sun/Bangladesh/26-Sep-12