Government’s finance division said it would not issue special bonds for implementing new power projects as banks face difficulties when bonds remain unsold.

Earlier, Power Division requested Finance Division for special bonds to finance newly proposed power plants, especially the coal-fired 1320 megawatt plant at Rampal in Bagerhat district.

In a letter to power division secretary on 13th of this month, Finance Division’s assistant secretary Abu Dayan Mohammed Ahsanullah conveyed their decision on issuing special bonds to fund power projects.

Meanwhile, the treasury bills and treasury bonds issued by government bond bazaar primary dealers through an auction failed to attract the clients.

As a result, Bangladesh Bank, banks and the government agencies concerned were forced to devolve the unsold bonds and bills on themselves, finance division letter said. It further said the government bills and bonds on the secondary market were not transacted to the expected level.

Besides, given the current financial strength and cash flow position in the country, finance division said the bonds without government guarantee have the lowest possibility of being sold.

In addition, interest rates of the new bonds will be very high, reads the finance division letter.

“So it’s not time befitting to issue new bonds in the market for implementing the new power projects,” the finance division directive said.

Power Division sought $302 million as equity for the newly-formed India-Bangladesh Friendship Power Company that will be responsible to set up the 1320MW coal-fired plant in Rampal, said a senior official.

He also said Bangladesh Power Development Board (BPDB) is likely to sign a power purchase agreement (PPA) with the Indian National Thermal Power Company (NTPC) on January 2 next year to implement the plant.

News: The Daily Sun/Bangladesh/21th-Dec-12

Bangladesh Bank Governor Dr Atiur Rahman, hands over scholarship to a student at a function at BB Head Office in Dhaka Thursday.

Bangladesh Bank (BB) has asked all the banks to introduce scholarship programme for poor but meritorious students as they are not capable of continuing their higher education, a high official of the central bank told reporters Thursday.

The objective of the central bank initiative is to bring more underprivileged students under the coverage of CSR (Corporate Social Responsibility) activities implemented by banks.

The central bank is likely to send a letter to all 47 banks operating in the country asking implementation of the scholarship programme from the current calendar year.

“We are to send letters to all banks soon, more likely by today, in this regard,” said deputy governor of the central bank, SK Sur Chowdhury.

Chowdhury said the number of students receiving scholarship annually by few banks including Dutch Bangla Bank Ltd, South East Bank Ltd and Prime Bank Ltd at present is merely 5,000 in total.

“Of them, DBBL alone covers 4,000 students every year while the numbers of students getting scholarship by other banks is meager,” he said.

Chowdhury said the amount the DBBL disburse under scholarship programme has been curtailed last year compared to the previous year which is affecting the bank’s reputation.

“I don’t want to see a declining trend in scholarship coverage. I want, DBBL will increase the amount again so that more students can be benefited,” he said.

Chowdhury said the scholarship coverage for underprivileged students may be increased significantly if all the banks came ahead with the initiatives.

He said, banks’ CSR in scholarship programme would contribute to develop human resources in the country.

News: The Daily Sun/Bangladesh/21th-Dec-12

The constitution does not allow a minister to hold the position of chairman of any bank, Bangladesh Bank Governor Atiur Rahman said yesterday. The central bank will go by the constitution, he said.

"There is no scope for a minister becoming chairman of a bank,” Rahman told The Daily Star, referring to Home Minister Muhiuddin Khan Alamgir's move to be the proposed chairman of the newly approved Farmers' Bank.

It is among the nine new banks approved by the central bank on April 8. Seven of them, including Farmers' Bank, have already applied for license and two others have been granted time to submit their applications.

Alamgir would not be able to hold the position of the bank's chairman after it has been given the license, said a Bangladesh Bank official. However, there was no legal bar to Alamgir being a shareholder of the bank, he added.

Article 147 (3) of the constitution strictly imposes a ban on the president, the prime minister, ministers and some other constitutional officials from holding any office, post or position of profit or emolument or taking part in the management or conduct of any company, association or body having profit or gain as its object.

If the documents submitted by the seven proposed banks are found to be valid they might be given the license by January next year, the BB official said.

BB Board would take the decision after scrutinising the business plan and other documents submitted by them, the central bank governor said.

"We are collecting all relevant information with due diligence," he said, adding the National Board of Revenue has been examining the source of the money that sponsor directors of these banks are going to invest.

News: The Daily Star/Bangladesh/21th-Dec-12

Bangladesh Bank has appointed a fraud detection adviser and taken some other supervisory steps to stop irregularities in the banking sector in the backdrop of the recent Hall-Mark loan scam.

The details of the 28-point supervisory measures were presented at a meeting of the BB board yesterday.

A web-based corporate memory management system (CMMS) has also been developed to record violation of banking rules by the officials and directors of banks and other financial institutions, the BB told its board.

Some irregularities by bank officials and directors have already been recorded in the CMMS and these will be reviewed later for taking further actions, the board was told.

Earlier, the BB board advised the authorities to find out the reasons behind the Hall-Mark scam and wanted to know about the measures the central bank is going to take to stop such frauds, a central bank official said.

At the board meeting, the central bank made a presentation, which highlighted its existing and future measures to stop such financial irregularities, BB Director Sadiq Ahmed told The Daily Star.

A BB report placed at the board meeting also portrayed the failure of Sonali Bank's treasury management, and gave details how a huge amount of money was embezzled by dubious Hall-Mark Group when the bank was going through financial crisis.

Sonali Bank gave loans worth Tk 10,883 crore from January to May this year. Of the amount, Tk 5,814 crore went to the private sector although the bank had a huge deficit in maintaining its cash reserve ratio, according to the report.

The adviser to detect fraud and mitigate related risks has already started working, the central bank told its board.

In another move, the BB has asked the banks to form a separate risk management unit. The units will do risk modelling, determining their risk limit, and analysing and supervising all the existing risks.

The financial integrity and customer service department of the central bank has inspected 53 branches of 26 banks that had links with the Hall-Mark scam carried out through the Sonali Bank's Ruposhi Bangla branch.

The department also conducted special inspections of several branches of Sonali, Krishi, Rupali, Agrani and Janata banks.

The BB has already taken actions against the officials concerned of these banks for which the volume of fraud-related bill purchase has come down now.

Regular inspections are being carried out to ensure whether due diligence is being followed in case of inland bill purchase and accepted bills.

The BB also said it has started regular preparation of diagnostic review report of the banks to bring the concerned banks under intensive monitoring after evaluating the gravity of irregularity through distant cautionary signal.

The banking regulator also said an assessment system has been introduced in banks to avert any probable irregularity.

News: The Daily Star/Bangladesh/21th-Dec-12

The central bank’s new provisioning policy guidelines may discourage banks and financial institutions from investing in the country’s most prospective and vibrant Small and Medium Enterprise (SME) sector.

If it happens, business and banking circles apprehend, it will severely affect the country’s rapidly growing SME sector on which more than 40-50 million people are directly or indirectly dependent.

The business and banking circles also said that it will, by and large, affect the country’s economic growth as the SMEs’ contribution to GDP may fall because of the new provisioning policy of the Bangladesh Bank.

Official sources said that the new circular, issued by the Banking Regulation & Policy Department (BRPD) of Bangladesh Bank on June 14 this year and then revised on September 23 brought some major changes to the existing bank loan classification and provisioning guidelines.

The changed guidelines halved the ‘overdue’ periods for loan classification from the existing ones, which will nearly ‘double’ the provisioning requirement.

Under the new regime, a term loan would be classified ‘bad’ and it will require 100 per cent loan loss provision when installments are overdue for 270 days, whereas under the existing policy it was 540 days.

Although requirement for general provision (GP) has been reduced from 1 per cent to 0.25 per cent, but the increase in specific provision will be much higher than the reduction in GP.

The bankers have been asked to implement the new policy within the current fiscal year.

Until issuance of the new circular, the micro and agriculture sector had been enjoying a special concession in receiving bank credit and in terms of loan classification and provisioning.

From a general point of view, many business and banking professionals have welcomed the new policy for large and medium corporates since it will align the country’s credit policies to international standards and streamline the banks’ credits.

News: The Daily Sun/Bangladesh/19th-Dec-12