Bangladesh Bank may not withdraw early warning regime from two private commercial banks because of their deteriorating financial statuses in every parameter.

The banks are Al-Arafah Islami Bank Ltd and Social Islami Bank Ltd (SIBL).

Meanwhile, BB has identified two other problem banks – ICB Islamic Bank Ltd and Bangladesh Commerce Bank Ltd. These banks failed to better their financial statuses and internal governance required to maintain market standard.

The central bank sources said, if any bank faces problems in financial operation, it is brought under early warning system and monitored very closely till the situation improves.

BB sources said the recovery status of non-performing loans by all the four banks is very poor, though these banks have substantially attained progress in some areas of respective financial operation.

The banking sector’s performance has been evaluated through CAMELS rating. The rating involves six crucial dimensions of analysis and evaluation of banking operations.

The dimensions include capital adequacy, asset quality, management soundness, earnings, liquidity, and sensitivity to market risk.

BB introduced Early Warning System of supervision from March 2005 to address the difficulties faced by the banks in any of the areas of required standards under CAMELS rating.

“The central bank’s assigned officials are closely monitoring improvement in the statuses of four banks so these banks can have good internal governance to ensure better performance,” said SK Sur Chowdhury, BB deputy governor.

He said the time of lifting early warning from the banks is yet to come, although concerned banks have improved output in some areas under the central bank’s supervision.

The managements of Al-Arafah Islami Bank and SIBL are trying to have ‘early warning regime’ lifted to show cleaning of bad image, said BB sources.

On the other hand, BB used CAMEL rating system to evaluate commercial banks analysing five indicators including capital adequacy, asset quality, management soundness, earnings, profitability and liquidity status.

The source added that BCBL and ICB Islamic Bank could not improve the capital base and asset quality as per requirement of CAMEL rating.

Five private banks earlier came out of problem bank category by improving in almost all necessary areas under CAMEL rating system, said the sources.

These banks included Pubali Bank Ltd, National Bank Ltd, United Commercial Bank Ltd, The City Bank Ltd and NCC Bank Ltd.

News: The Daily Sun/Bangladesh/15-Nov-12

The government has appointed four directors in three financial institutions including the Bangladesh Bank (BB), official sources said.

The Banking and Financial Institutions Division of the Finance Ministry Wednesday issued four separate circulars on appointment of the directors for the BB, the International Finance Investment and Commerce (IFIC) Bank and the Bangladesh House Building Finance Corporation (BHBFC).

As per the circulars, the newly-appointed Banking Secretary M Aslam Alam, and Chairman of the National Board of Revenue (NBR) and Secretary of Internal Resource Division Md Ghulam Hussain have been appointed directors of the BB.

M Aslam Alam will replace Shafiqur Rahman Patwari and Md Ghulam Hussain will replace Nasiruddin Ahmed.

Additional Secretary of Finance Division Jalal Ahmed has been appointed government director of IFIC Bank and Additional Secretary of the division Shudhangshu Shekhar Biswas as director of BHBFC.

News: The Daily Sun/Bangladesh/15-Nov-12

A portion of bank credit is being used for unintended purposes due to weak monitoring by the regulator and the banks, two former central bank governors and a business leader said yesterday.

The central bank will have to earn autonomy by running the banking industry effectively, they said.

Former governors -- Mohammed Farashuddin and Salehuddin Ahmed -- and President of the Federation of Bangladesh Chambers of Commerce and Industry AK Azad made the observation at a discussion on the situation in the banking sector and macroeconomic challenges.

The Economic Reporters' Forum (ERF) organised the programme at the National Press Club in Dhaka with its President Khawaja Main Uddin in the chair.

“Credit has to be ensured for productive sectors, including small and medium enterprises,” Salehuddin said.

Ahmed said he carried out a research on 18 bank branches recently and found that the banks did not know where the credit was going.

The private sector credit witnessed 19.9 percent growth in the first quarter (July-September) of the current fiscal year against a monetary policy target at 16 percent, according to Bangladesh Bank data.

“Loans are not going to the targeted areas, if so, the economic growth would have been higher,” said AK Azad, who is a leading apparel exporter and a director of a private commercial bank.

“Banks are crazy for profits, they don't see quality always,” said Azad.

Farashuddin questioned if there is such a high growth in credit, why did the private sector investment go down by 1 percentage point last fiscal year?

Hassan Zaman, the chief economist of Bangladesh Bank, said they are working to find where the credit is going.

“The quality of credit growth matters,” Zaman said.

“We're trying to reduce the loan concentration among some big borrowers,” he said.

There was also a debate between the former and present officials of the central bank on the private sector credit growth The FBCCI president fuelled the debate, saying the private sector's credit growth should increase to 25-30 percent to help entrepreneurs create more jobs.

The chief economist of the BB said more credit will fuel inflation to double digit levels that will affect the poor.

He also said the credit growth in India is at 15 percent, which is nearly 20 percent in Bangladesh.

Former governor Ahmed said, “We should not mix up the credit growth of Bangladesh and India; they are different.”

He said India has a very big equity market and companies raise funds from the stockmarket before going for bank loans, but Bangladeshi companies prefer credit from banks.

On the central bank's autonomy, Deputy Governor SK Sur Chowdhury said the BB has the functional autonomy except for giving the employee benefits that are in the government's hands.

News: The Daily Star/Bangladesh/15-Nov-12

The central bank has imposed service charge on clearing automated cheque for the first time to afford the operational and maintenance costs of automated cheque processing system launched two-year back. The service charge will be effective from January next year and will remain enforce for one year, said a Bangladesh Bank (BB) press release issued on Tuesday.

A bank has to pay VAT (value added tax) worth Tk 25 to the central bank and that the respective bank will
realise Tk 50 from its clients for any high value cheque, the BB said.

In case of regulatory value cheque clearing, bank has to pay Tk 5.0 as VAT and will realise Tk 7.0 from their clients, it said.

And in case of any electronic funds transfer network, bank has to pay Tk 5.0 as VAT and will realise Tk 7.0 from their clients, it added.

The BB introduced Bangladesh Automated Clearing House (BACH) with the financial assistance of British donor agency DFID to modernise the payment system infrastructure.

With its two wings, Bangladesh Automated Cheque Processing System (BACPS) and Bangladesh Electronic Fund Transfer Network, BACH acts as the most sophisticated electronic channel for settling inter bank financial transactions throughout the country.

The BACH has started its operation in October 2010 by replacing the manual cheque clearing system with image and date-based cheque truncation system where Magnetic Ink Character Recognition encoded cheques are exchanged in encrypted form between the participating banks through a secured communication link.

After introducing the system, the high value cheque clearing has doubled and the duration of clearing time has reduced significantly maximising speedy payments, officials said.

Through the automated system, the central bank cleared an average 85,000 regular value cheques and high value cheques worth Tk 4,700 crore in a day.

However, earlier it had taken 7 to 30 days to clear high value cheques.

According to BB, of the total 85,000 cheques, 80,000 are regular value (below Tk 5 lakh) and the remaining 5,000 are high value (worth Tk 5 lakh and above) cheques.

The number of high value cheques rose to 5,000 in the automated system from 2,000 in the manual system, and the number of regular value cheques also increased to 85,000 from 70,000 in the previous system.

News: The Daily Independent/Bangladesh/14-Nov-12

Bangladesh Bank will impose charges on transactions of Bangladesh Automated Clearing House (BACH) with effect from January 1 next.

“Such charges (of three categories) will primarily remain effective for one year from January 1,” said a BB circular sent to the Managing Directors and Chief Executives of all the banks.

The central bank will realise Tk 25 plus VAT (value added tax) for high value cheque clearing from the respective bank while Tk 50 plus VAT from clients.

It will also impose Tk 5 plus VAT for regular value cheque clearing and any EFT (electronic fund transfer) transactions.

In that case, the bank will realise Tk 7 plus VAT from the clients.

The BACH has two components - Bangladesh Automated Cheque Processing System (BACPS) and Bangladesh Electronic Funds Transfer Network (BEFTN) -- by which the clients were availing themselves of modern banking facilities.

News: The Daily Sun/Bangladesh/14-Nov-12