The targets were calculated by subtracting government and agriculture loans from the total loan status of each of the banks

Bangladesh Bank has set a total credit limit of Tk6,186 crore for four state-owned banks for this year.

Based on adjusted loan status of the previous year, the central bank has set separate credit targets for the banks - Sonali, Agrani, Janata and Rupali – with signing separate memorandum of understandings (MoU) recently.

The targets were calculated by subtracting government and agriculture loans from the total loan status of each of the banks.

As the banks are to disburse certain amount of loans to the government and agriculture sector every year, the ceiling of bank credit is determined on the basis of the adjusted loans so the banks could disburse loans in other sectors, said a senior executive of Bangladesh Bank. 

He said the central bank has tightened regular monitoring on aggressive loan disbursements, although most of the banks have failed to achieve the growth target last year due to overall slower credit growth in the country amid sluggish investment climate and political unrest.

“As a result, the central bank did not extend the credit ceiling of most of the banks so they could fully comply with their respective targets and other conditions set by the central bank.”

All the four banks failed to achieve the credit growth target set by the central bank in 2013, excepting Rupali Bank. Considering the credit disbursement performance of the banks,

Bangladesh Bank did not expedite the new ceiling for Agrani and Janata, rather it has cut the credit limit for Sonali Bank.

The credit target has been increased only for Rupali Bank as it had surpassed the loan ceiling fixed for last year. The credit ceiling of Sonali Bank has been set at Tk1,328 crore for the year 2014, which is 6% of the adjusted loan status of Tk22,133 crore in 2013.

The adjusted loan growth rate of Sonali Bank was negative 7.07% in the last year against the target limit of 8% set by Bangladesh Bank. The total loan growth of the banks decreased by 11.67% or Tk3,963 crore in the last year.

The loan disbursement limit of the Agrani Bank has been set at Tk1,676 crore for the year 2014, whichi is 10% of the adjusted loan status of Tk16,764 crore of 2013.

Adjusted loan growth rate of Agrani Bank was negative 0.63% during the last year against the target limit of 10%. Total loan disbursement of the bank reduced by 7.76% or Tk1529.44 crore in the year 2013.

The credit limit of the Janata Bank has been set at Tk2,206 crore for the year 2014, which is 10% of the adjusted loan status of Tk22,067 crore of 2013.

The growth target of the Janata Bank was same in the last year but the bank was able to achieve only 1.15% of its target. The total loan disbursement of the bank was reduced by 8.59% or Tk2,405 crore in the year 2013. The central bank set the credit limit of the Rupali Bank at Tk976 crore for the year 2014, which is 12% of the total adjusted loan status of Tk8,139 crore of 2013.

The adjusted loan growth of the bank increased by 13.98% in the year 2013 against its 10% target limit of the adjusted loan status set in the MoU. The total loan growth of the bank increased by 18.59% or Tk1,613 crore in the last year.

The central bank punished the Rupali Bank asking it to block the excess loans that it had disbursed beyond its target limit.

News:Dhaka Tribune/30-Apr-2014

 Bangladesh Bank Governor Dr. Atiur Rahman emphasised on the need for establishing special economic zones for women entrepreneurs so that they can come forward and participate at the country’s development process.

He also called upon everybody to change their mindsets towards women and said wrong mindset about women is one of the major challenges that hampers their success both in social and business lives.

Atiur came up with the call while addressing as chief guest the inauguration of a day-long ‘Women Entrepreneurs Conference and Products Display” held at Ruposhi Bangla Hotel in the capital on Thursday.

The SME and Special Programme Department of Bangladesh Bank in cooperation with all banks, non-banking financial institutions, JICA, CARE Bangladesh and Standard Chartered Bank arranged the programme in order to encourage women entrepreneurship by speeding up financing to the projects undertaken by women entrepreneurs.

Abul Kashem, Deputy Governor, Professor Hannana Begum, Director of Bangladesh Bank, Mikio Hataeda, Chief Representative of JICA Bangladesh, Jamie Terzi, Country Director of CARE Bangladesh, Kazi Akram Uddin, President of the Federation of Bangladesh Chambers of Commerce and Industry, Ali Reza Iftekhar, President of the Association of Bankers, Bangladesh, Rokia Afzal,

 President of Metropolitan Chamber of Commerce and Industry, Mohammad Shahjahan Khan, President of Dhaka Chamber of Commerce and Industry addressed the programme as special guest.

Nirmal Chandra Bhakta, Executive Director of Bangladesh Bank chaired.

The participation of women in managerial posts of different organisations has been increased remarkably, Dr. Atiur said mentioning that women participation which was 19 percent in the managerial posts 10 years earlier has now jumped to 24 percent.

“Financing the projects of women entrepreneurs would be profitable investment for the banks, now-a-days,” Atiur said.

“The women entrepreneurs are never get defaulters. After taking loans from the banks they repay it in time which is a great opportunity for the banks to invest,” he added.

Addressing the programme, Kazi Akram Uddin informed that there are seven women chambers in the country now. 10 other applications to establish women chambers has also been submitted. He hoped that women chamber will established at every districts of the country.

Calling upon the women to come forward to invest in productive sectors, Akram also emphasized on the necessity of changing everybody’s mindset in this connection. Women are investing in many sectors which are generating huge employment also also contributing lot to the country’s economy, said Abul Kashem.

Calling upon the government to institutionalise women entrepreneurship, Rokia Afzal said that women are facing various obstacles in doing business.

Jamie Terzi said that the uplift of female community is the major provision of entire development of a nation while it is necessary to involve the women in economic activities to enjoy such development.

Mentionable, around 500 women entrepreneurs participated in the conference to display their products and services. A total of 78 stalls were set up at the venue where the entrepreneurs displayed their products.

The government has instructed the four state-owned commercial banks (SoCBs) including Sonali, Janata, Rupali and Agrani bank to invest their excess liquidity to the treasury bonds to reduce the ideal money from banking sector. The finance ministry also instructed the SoCBs to declare their excess liquidity to the finance ministry as well as the central bank. The finance ministry made the direction after a meeting with high officials of various banks especially the state-owned banks. The meeting was presided over by the additional secretary of Banking and Financial Institution Department of Finance Ministry, Gokul Chand Das.
Until November last the SoCBs' excess liquidity stood at Tk 343.94 billion against the entire banking sector's excess liquidity of Tk 901.66 billion.
Banking source said that banks could invest up to 81 per cent of their liquidity. Until November last the Sonali Bank invested 49 per cent, Janata Bank 63 per cent, Agrani Bank 63 per cent and Rupali Bank 61 per cent of their liquidity.
The central bank Executive Director M Mahfuzur Rahman told The Independent that the idle money of banking sector increased due to the political turmoil across the country over the last of months, especially before the last general elections. During the political unrest, a good number of banks failed to disburse their money on big project and large volume industrial loans.
Commenting on Sonali bank’ excess liquidity, he said that the bank is one the largest financial institution of the country. “If a significant portion of its fund remains idle, the bank will incur a heavy loss and employment generation will be affected”, said the executive director.
He expected that excess liquidity form banking sector would gradually decrease as the country’ political situation is now quite stable and banks are trying to fulfil their disbursement targets. The central bank also instructed banks to invest their money in productive sector to reduce excess liquidity, he also added.
Moreover, the government is going to reintroduce two-year treasury bonds to facilitate public borrowings and make the securities market vibrant. The government has set a target of borrowing Tk 7 billion through treasury bonds from the banking sector in the remaining period of the current fiscal year ending on June 30, he also said.
Another central bank official said the central bank still needs more information to have complete scenario of the banks’ health and is on move to collect more information about excess liquidity.
Obayet Ullah Al Masud, Deputy Managing Director of Rupali Bank said that his bank is not a member of Primary Dealer banks. Without membership of PD, bank can not invest their money in treasury bonds. The bank official demanded for the membership of PD banks for Rupali banks to invest their money in treasury bonds.
Meanwhile, the ministry directed the SoCBs to submit their investment proposal in different bonds within a week. The ministry also directed Rupali bank to take necessary steps for the membership of AD banks so that they can invest their money in the treasury bonds.
Banking source said that the rate of interest of the Treasury bond is low that is why a good number of banks are discouraging to invest in government bonds. Banks deposit rate is higher than the interest of government bonds, so it is very tough for banks to invest their deposited money into the government bonds, pointed Saiful Islam Patwary, manager of First Security Islami Bank, Dilkusha branch.
Talking to this correspondent, renowned economist, Professor Abu Ahmed pointed that there is no obligation to invest in treasury bonds which is fully depended on bank’s financial condition. He said that investment by force in government bonds is unethical. The economist urged the government to offer higher interest rate to the treasury bonds to encourage banks to invest more in the bonds.
Business people, however, expressed a different view. While talking to this correspondent Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) vice president Md Helal Uddin said that economy would face a huge challenge if the deposited money of the investors invested in the government bonds.
Private sector development would hamper if the excess liquidity is invested in treasury bonds, the business leader also pointed out.
He said that the business community is now availing the loan facilities at the rate of 20 per cent across the country. “It is very hard to establish the industry as well as operating the business by this hard term loan”, said the FBCCI vice-president. He demanded bank loans, with single digit interest, for entrepreneurs to have a smooth business.
The FBCCI vice president also pointed out that a good number of businessmen took the loan facility from foreign fund at the rate of 5 per cent which is more profitable for them. He suggested that banks have to allocate low interest loan to reduce the excess liquidity which, he said, would benefit the businessmen community as well as the economy.
At present various types of treasury bonds are available in the market having various durations. PD banks, financial institutions and insurance companies are the customers of treasury bonds. The care taker government banned the two-year period treasury bond. Bank officials,
however, suggested reintroduction of two-year bonds as it was to encourage short term investment.
According to banking sources, the government usually take bank loans by purchasing treasury bonds to meet its budget deficit. It is a long term investment.

News:The Independent/13-Mar-2014

The suggestion came at the bankers’ meeting at the central bank headquarters in Dhaka

Bangladesh Bank yesterday asked the commercial banks to bring down their capital market exposure gradually in line with the law so the stock market does not see drastic fall.

The suggestion came at the bankers’ meeting at the central bank headquarters in Dhaka.

“The banks have been asked to cut their capital market exposure gradually within three years. Because if they cut their investment at a time after three years, then capital market might face freefall,” Deputy Governor SK Sur Chowdhury told reporters after the meeting.

Pointing fingers at the share market debacle in late 2010, he said banks should be careful in share market investment so that history of debacle is not repeated. 

Pubali Bank Managing Director Helal Ahmed Chowdhury said the central bank asked not to go for drastic share sale and also to keep support to the capital market’s stability.

In September 2013, the BB directed the commercial banks will have to reduce their capital market exposure to 25% of their equity by July 2016 in accordance with the new bank company law.

The directive came two months after the parliament passed the Bank Company (amendment) Act.

Under the law, the banks still having higher exposure to the stock market will have to reduce it to 25% of their paid-up capital, reserve, retained earnings and share premium.

During calculation of their total investment in stocks, the banks will have to take elements like all kind of shares, debenture, corporate bonds, mutual fund units and other securities into account.

Banks will have to follow all necessary banking rules and regulations in lending credit to their subsidiary companies like brokerage firm, merchant bank and other similar institutions.

After the present government’s assuming power in 2009, the stock market showed a bullish trend and many banks invested beyond their limits. But after a price debacle in late 2010, the banks’

huge exposure came under criticism from various quarters. The International Monetary Fund and the Asian Development Bank recommended that the banks’ investment in the capital market should be 25% of their equities instead of deposits (liabilities). 

The central bank yesterday warned banks against excessive exposure to the capital market, in a bid to ward off a bubble burst witnessed in the previous terms of Awami League.
Bangladesh Bank Governor Atiur Rahman came up with the warning at his first meeting with the chief executives of banks after a new government led by Awami League assumed power last month.
The money market and the capital market will complement each other within the law, and the central bank will strictly monitor all activities to prevent any deviation, he said.
Some banks are investing in the capital market beyond their permissible limit, which goes against the spirit of the recently amended banking law, Rahman said at the meeting at his office in Dhaka.
The governor discussed various issues, including the capital market, default loans and the overall macro-economic situation.
The stockmarket saw a boom when the Awami League-led government came to power in 2009. The market later went through a debacle, which analysts blamed on excessive investments by the banks.
SK Sur Chowdhury, BB deputy governor, told reporters after the meeting that the banks were asked to remain alert so that the crisis does not repeat.
Banks cannot invest more than 20 percent of their capital in the stockmarket, according to the amended banking companies act. The previous law allowed banks to invest 10 percent of their capital.
In line with the new law, the banks that invested more than the limit were asked to bring down the amount below the ceiling by July 2016.
The central bank found six banks have excessive investment in the capital market. The banks were asked to send a plan to the BB on how they would gradually bring down the amount to the acceptable level.
The amount of default loans decreased by 28 percent or Tk 16,137 crore in the fourth quarter last year. The BB governor said the amount fell as loans were rescheduled under a relaxed policy.
He also advised the banks to form a recovery unit to realise the bad loans.

News:The Daily Star/19-Feb-2014