The central bank will encourage credit growth in the private sector in an effort to raise economic growth to 7.2 percent, the highest ever target set by the government for the current fiscal year.

The Bangladesh Bank will put all its efforts to achieve the GDP growth target, defying gloomy forecasts made by multilateral lending agencies in the backdrop of a financial crisis in the Eurozone.

The central bank on July 18 will announce the new monetary policy for the current fiscal year where it will raise the target of private sector credit growth over the existing monetary policy target to achieve the goal.

The BB announces monetary policy twice a year -- in January and July.

In the current fiscal year, the private sector credit growth target is going to be set at more than 18 percent, up from 16 percent in the existing monetary policy announced in January.

An official of the central bank said, alongside the higher growth target, a restrained policy stance will also be pursued and credit to unproductive sectors will be discouraged to curb inflationary and external pressures.

BB Governor Atiur Rahman on Wednesday told The Daily Star that the monetary policy will have three main targets: achieving employment-led growth, bringing down inflation to 7.5 percent, and ensuring inclusive growth.

Another BB official said economists on several occasions complained that monetary policy does not work in Bangladesh. But most of the monetary policy targets were met in the last fiscal year, he added.

The official said they will achieve the goals this year too.

The Asian Development Bank in its "supplementary outlook" released yesterday said a debt crisis in the Eurozone and a slow recovery in the US will cast a shadow on growth outlook in some South Asia countries including Bangladesh.

However, the BB official said if the monetary policy and the fiscal policy can be coordinated properly, the growth target will be met.

Inflation also could be brought down within the target, he added.

From the beginning of fiscal 2011, inflation has been increasing every month, and non-food inflation crossed double digit for the first time.

However, due to the restrained monetary policy, non-food inflation could be brought down by 1 percentage point in the last fiscal year, he said.

The BB official said they will ask the government to cut the target of government borrowing from the banking sector in the current fiscal year to increase credit flow in the private sector.

He said the government borrowed Tk 8,000 crore less than the target of borrowing from the banking system in the revised budget of the last fiscal year.

The official also said, besides inflation, the pressure on exchange rate has eased much because of the government steps taken under the monetary policy.

The balance of payments had been in deficit for several months before turning surplus by $11 million during July-May last fiscal year, compared to the same period a year ago.

Apart from this, the exchange rate, which had been increasing gradually in the recent times, has started to fall.

The central bank official said they are now buying foreign currency from the market to prevent much appreciation of the taka against the dollar.

The Daily Star/Bangladesh/ 13th July 2012

Industries Minister Dilip Barua assured the SME sector that the government has laid due emphasis on removing hassles of getting loans.

He was addressing the inaugural ceremony of ‘Integrated support of poverty and inequality reductions through enterprise development’ (INSPIRED) project at a city hotel Tuesday.

The Industries Ministry has undertaken the project to attain institutional capacity for formulating a SME development strategy in cooperation with European Union (EU).

EU ambassador to Bangladesh William Hanna was present as special guest.

Industries Secretary KH Masud Siddiqui presided over the function.

Dilip Barua mentioned that small and medium enterprises constitute 90 percent of private sector and 70 to 80 percent of non-agricultural workforce.

“It (SME sector) made up to 25 percent of national gross domestic product last year,” he said.

The six-year project will be implemented at the cost of 19 million euro, provided by EU.

Bangladesh bank and the commercial banks’ ability to provide support will be increased by the programme.

The project is also intended to widen the avenues of communication between the bankers and entrepreneurs.

It will make attempts to develop industrial clusters including of agricultural products processing, electronics, plastic goods, light engineering, furniture, textiles and leather.

“This project will enable Bangladesh in the long run sustainable economic growth,” said Dilip Barua.

Focusing on SMEs contribution to national economy, he also expected that the ISPIRED project will expedite the development of SMEs.

ABM Khorshed Alam, additional industries secretary and project director also spoke at the function. A number of small and medium entrepreneurs and senior government officials were also present.

The Daily Sun/Bangladesh/ 12th July 2012

Circulation of fake currency dropped by 50 percent amid intensified drives by the law-enforcement agencies after Bangladesh bank (BB) took a tough stance against forged notes since October last year, according to a BB survey.

The survey, carried out by BB officials, was based on the statements by members of identified syndicates involved in printing and circulating forged currency notes and the assessment of the members of law enforcement agencies.

“Per head distribution of the counterfeit currency value is maximum Tk. 0.10 (ten paisa) at present which was almost double nine months ago,” a concerned BB official told daily sun.

Per head distribution means estimated annual financial loss to millions of end-users across the country, he said.

According to the survey, the value of circulated fake notes in the country will be around Tk 15 million at present, as the country harbors 150 million populations, he said.

According to the survey, fake notes of around Tk 15 million still exist in the market currently against the country’s total population of 150 million.

The circulation of fake bank notes rose abnormally after new notes of Bangladeshi Taka, marked with the image of Father of the Nation, Bangabandhu Sheikh Mujibur Rahman, launched by the central bank in August last year.

In August last year, the central bank had introduced 23 million new currency notes. According to BB data, there are 500 million pieces of Tk 2 notes, 200 million pieces of Tk. 5, 400 million pieces of Tk. 10, 200 million pieces of Tk 20, 100 million pieces of Tk 50, 400 million pieces of Tk 100, 300 million pieces of Tk 500 and 200 million pieces of Tk 1,000 notes.

Currently, currency notes worth Tk 650 billion is in the market, according to BB statistics.

As the fake currency notes continues to pose a big threat to the currency notes, the central bank had sought close cooperation of the law enforcement agencies to round up members of the syndicates involved with note forgery after some cases of major fake note transactions were detected in September same year.

In September last year alone, police rounded up some 20 members of such syndicates and seized currency-making equipment and thousands of new counterfeit notes during raids in the city, according to police records. Till June this year, the number of arrested members of organised gangs involved in this illegal practice rose to above 50, said a concerned BB official.

“This clearly indicates that syndicates involved with it are using improved technology to produce counterfeit notes. We found that the forged notes were generated by computer by copying the genuine ones,” said the official expressing concern over rising banknote forgery.

The BB official said rising circulation of counterfeit notes was causing immense financial loss to millions of end-users across the country every day.

Using improved technology, active domestic and international syndicates were producing counterfeit notes, exactly matching the features of the genuine ones, he said.

However, the scenario has changed because of massive awareness campaign by the central bank through media and various publications, seminars and symposiums across the country, he said.

The BB official said mobility of every counterfeit note stopped at maximum third stage of transaction as users identify its fragile colors easily. He said the first stage is the wholesaler, second is the retailer and third is the end-user.

Commenting on this issue, former central bank governors Dr Salehuddin Ahmed has laid emphasis on ensuring strong security feature and distinguish the currency notes in size and color to prevent circulation of fake notes.

“Similarity in size and outlook of currency notes usually creates confusion among users and they can not distinguish the difference between genuine and fake notes during rush hours or during the load-shedding periods,” he said.

The renowned banker also underscored the need for proper implementation of laws so that none of the arrested members of forge note printing syndicates could get bail from the court.

“One of the major reason for rising circulation of fake notes is the superiors (syndicate bigwigs) always remains behind the scene and they help their associates evade punishment,” he said.

Dr Ahmed categorically disagreed to the central bank’s survey regarding reduction in the average financial loss of citizens due to mobility of fake notes.

“I am not sure whether the survey report is right! For example, a poor person who earn Tk 500 a week suddenly fall victim to fake note. His loss is a cost of a week’s labor. So, the magnitude of financial loss from fake notes cannot be average at all,” he said.

He said the duty of the central bank in this regard is to create trust among currency users by protecting its security properly.

He said fake note circulators often take advantage of the people’s ignorance about the differences between genuine and forged notes.

While narrating the main feature of a genuine note, a BB official said its colour cannot be wiped out. “In case of a fake one, the touch of even a wet finger can do so,” said the official.

The latest notes, he added, were made of high-quality cotton (90 percent) and polymer (10 percent) with a synthetic security thread in the middle. It has three pixel watermarks, including one of Bangabandhu Sheikh Mujibur Rahman, and a tiger.

The genuine notes were made of optically variable ink (OVI), which usually altered in various lights, he added.

A genuine note was made of a high-quality paper that would protect the note from getting damp, while the paper of a counterfeit note moistens easily, he said.

The Daily Sun/Bangladesh/ 12th July 2012

The Bangladesh bank (BB) Wednesday annulled the authority of branch offices of different banks on payment of local bills under various L/Cs (Letters of Credit).

From now on, the branch office management must obtain prior approval of the respective head offices in case of acceptance of import LCs, which linked to payment of bills through both local and foreign currencies, according to the circular.

The central bank authority said it has found in recent investigations that importers are involved in mobilising funds (cash) from banks under the provision of ‘Accommodation Bill’ by opening LCs though there are no real business transactions.

“As a result, banks are losing their liquidity strengths, ultimately posing threat to banks’ cash base,” reads the BB circular.

The Daily Sun/Bangladesh/ 12th July 2012

The central bank yesterday warned banks against purchases of fake trade bills, a phenomenon that threatens to undermine the banking system.

The warning comes in response to the precarious financial health of some banks, due to purchases of fake bills which have drained crores of taka out of them.

In a notice issued yesterday, Bangladesh Bank has forbidden decisions at branch level on purchases of bills -- in local or foreign currency -- until further notice.

The branches will have to take written permission from the head office to do such transactions, the regulator said.

The accommodation bills of letters of credit (LC), in any currency, must not be honoured without verification of the items, the central bank said.

Banks usually open LCs and purchase or discount or negotiate bills under LCs in genuine commercial and trade transactions of their borrowers. The problem arises, when trade transactions between two persons are unreal.

The central bank said it has detected an increasing tendency to cash in LCs without any real trade taking place.

A senior official of a commercial bank said the fraud happens in two ways: firstly, influential businessmen exercise their influence to take out money against the LCs, and secondly, a section of bank officials assist the businessmen to do so.

A top central bank official said it occurs frequently. "We are taking measures to stop this malpractice," he said.

"We have sought information from the banks. We will take necessary steps after we receive all information."

In May, Bangladesh Bank retrieved Tk 523 crore from four local banks on behalf of Sonali Bank after non-payment for a transaction of Beximco Group.

Two sister concerns of Beximco Group -- Beximco Ltd and Bextex -- transacted goods between themselves via LCs in takas.

Bextex, which was the seller, obtained an LC from Sonali Bank for the transaction, while the buyer Beximco Ltd committed to pay via four banks: Janata Bank, Agrani Bank, Rupali Bank and Exim Bank.

As it turns out, Beximco Ltd did not pay the four banks, and they, in turn, did not pay Sonali Bank.

Also in May, Sonali Bank relieved three of its senior officials of their duties for lending Tk 2,638 crore to a little-known Hallmark Group in a similar case.

The Daily Star/Bangladesh/ 12th July 2012