The Asia Pacific Group (APG), a global anti-money laundering body, has asked the government to prepare a guideline on financial operations of local stock related companies to check money laundering.

The anti-money laundering watchdog has also urged the government to tag few international practices as condition for the country’s postal and cargo service providers, sources in Banking Division of the Ministry of Finance said.

Those conditions and directives were given during a recent meeting of the Asia-Pacific Review Group on money laundering activities in the country. A total of five members of Bangladesh Bank and the Banking Division attended the meeting held in New Delhi.

Deputy Governor of Bangladesh Bank Abu Hena Mohd Razee Hassan headed the Bangladeshi delegation in the meeting.

From now on, the APG will review anti-money laundering activities in Bangladesh as it is on its gray list at present. If the country doesn’t work properly for the next four months, it might go to APG’s black list, sources informed about the meeting told daily sun.

The review group further put a condition of thoroughly checking all travelers if they carry more than US $ 5,000 with them while going outside Bangladesh, sources said.

The Daily Sun/ Bangladesh/ 26-May-2012

In an effort to reduce government borrowing from banks, the central bank instructed executives of all scheduled banks and their branches to motivate people to invest more in national saving instruments. Different types of savings certificate are known as key instruments for government to mobilise funds for deficit financing.

But people, according to sources, have seemingly turned away from investing in this once 'most safe' option.
Even an increase in interest has failed to woo the clients.

As a result, the government's target of raising Tk 60 billion through sales of savings certificates to finance the budget deficit for the current fiscal now seems to be a 'distant dream'.

Amidst this situation, Bangladesh Bank issued a circular recently expressing its resentment, as sales of savings instruments did not pick up despite increase of interest rates. “Despite adopting various steps including increase in interest rates, sales of the national savings instruments still remain very sluggish,” said the directive urging officials to cooperate as well as encourage the clients to invest in various scheme of national savings instruments.

Alongside a fall in the sales of savings instruments in recent times, the savers are learnt to be encashing their savings instruments and depositing the money with banks as they offer higher interests.

“It is learnt that officials of concerned departments are not cooperating rather discouraging people in various ways not to invest in savings instruments,” said the directive issued by Debt Management Department of Bangladesh Bank. It urged officials to help people to participate in nation development activities by involving themselves with national saving schemes.

The recent statistics of saving certificate sales in the first eight months of this fiscal show the income from savings certificates is in the red, which means there was apparently no sale of savings instruments during this period. The earnings from certificate sales have exceeded the amount paid to the clients as interests.

Sources in financial sector informed that huge amount of money of the people are stuck in the capital market. When the market was doing well, people had put money there through selling their savings certificates. The government is now offering more than 13 per cent interest on those certificates.

"However, after the capital market crash, no one is selling shares at a loss and they are waiting for an opportune moment to recover their investments,” said an analyst.

The Independent/ Bangladesh/ 22-May-2012

Atiur Rahman

The annual board meeting of the Asian Clearing House (ACU) is a unique platform for exchange of experiences and ideas on the opportunities and challenges in deepening ACU intraregional trade and investment relationships that keep arising from unfolding developments in the regional and global scene.

An overview of recent economic trends in Bangladesh shows that the country's economy is getting ahead with firm footing on stable growth path, with real GDP (gross domestic product) growth averaging above six per cent annually over the last decade. Poverty has been on steady decline by about two percentage points a year, coming down to 31 per cent of the population by 2010. But of course along the way the economy faces occasional external and internal jolts impacting in various degrees on growth, inflation and exchange rate stability. Lagged effects from the global financial crisis and energy supply shortages played part in causing a short spell in mild growth slowdown, with real GDP growth coming down from 6.2 per cent of FY08 to 5.7 and 6.1 per cent respectively in FYs 09 and 10. However, economic activities rebounded sharply in FY11 as energy scarcities eased and export demand picked up, with 6.7 per cent real GDP growth, nearly 42 per cent growth both in exports and imports, and 28.4 per cent expansion in domestic credit. The credit growth surge stoked up creep of CPI inflation, pushing it beyond comfort zone into double digits since October 2011. Bangladesh Bank's (BB's) monetary policies adopted a restraining stance in FY12 for orderly, smooth touchdown to trend levels from the FY11 credit and external trade surge, aimed at limiting domestic credit growth to 19 per cent and bringing inflation down to single-digit level by June 2012. Towards attaining these objectives, besides raising policy interest rates (BB's repo, reverse repo interest rates) by 100 basis points and restraining reserve money growth, interest rates caps on some types of lending imposed during the global financial crisis were done away with, freeing up lending and deposit interest rates.

These steps slowed down domestic credit growth and helped stabilise the exchange rate of Taka in a new equilibrium (Taka 81.83 per USD in March 2012 against Taka 72.78 per USD in March 2011), trimming off excess demand. Import growth came down to 14.53 per cent during July-Feb, of FY12 from 41.8 per cent in the same period of FY11, export growth stood at 10.4 per cent during July-March FY12 against 40.3 per cent in the same period of FY11. Remittance inflows from workers abroad increased 10.3 per cent during July-March in FY12, helping sustain the BoP (Balance of Payment) current account balance in positive. Decline in CPI (Consumer Price Index) inflation has been slower to show up than the decline in monetary growth, mainly due to repeated rounds of hikes in administered user prices of energy needed to ease fiscal subsidy burdens. Nevertheless, point to point CPI inflation at 10.10 per cent in March 2012 was the lowest since the beginning of FY12.

To avert negative impact of the tightened monetary stance on GDP growth, BB is maintaining a deliberate pro-growth directional bias in credit policies. An ongoing comprehensive financial inclusion drive is working towards ensuring adequate credit flows to supply side activities including farm and non-farm productive pursuits of micro and small enterprises, while discouraging credit growth for conspicuous consumption and unproductive, speculative uses. Refinance support lines available from BB to banks against their lending to agriculture and SMEs are being funded by the government and external development partners. Flexibility of the market based exchange rate of Taka is helping preserve external sector competitiveness; exporters affected by demand weakness in advanced economies are making successful forays into newer markets in fast growing emerging economies. With growth supportive macroeconomic policies and a congenial, welcoming openness to foreign direct investments, Bangladesh economy looks well poised for attaining the expected near seven per cent real GDP growth in FY12 and single-digit inflation by June 2012, on track towards still faster growth over the medium term.

Bangladesh's trade with ACU member countries remained buoyant in calendar year 2011, even as overall ACU intra-union trade settlement transactions were on decline. According to ACU Secretariat Newsletters data, Credit (export receipt) and debit (import payment) transactions of Bangladesh with other ACU members increased 99.6 and 23.1 per cent respectively in 2011 compared to 2010, although total ACU intra-union imports and exports registered a 29.5 per cent decline. January-February 2012 transaction volumes were also on declining trend, both for Bangladesh and ACU-wide totals. These declining transaction trends may be transient, mainly reflecting the current demand slack in Western advanced economies. Of greater relevance for stable longer term regional growth is the share of ACU intraregional trade as percentage of total external trade of the region. This still remains slow changing and quite small, particularly for the larger ACU member countries, despite our regular lip service to strengthening of intra-union trade and investment cooperation in successive board meetings like this. Increasingly, the global community is looking up to our region as a key growth driver in the global economy; and we need to prepare our Union to play that role with optimal use of its potentials. Ideas on steps towards greater trade and investment cooperation mooted in past several Board meetings have been routinely passed on to technical committees that have tended to come up with suggestions largely in favour of continuing with status quo.

There should be resolute efforts towards some real progress in deepening ACU-wide co-operation and integration on at least some directions that others have already started adopting. This may inter alia include broadening and upscaling of our ACU swap arrangement on lines similar to the bilateral swap arrangements between central banks in the ASEAN+3 Chiang Mai initiative; and reintroduction of settlement of intra-Union trade transactions in member country currencies. India is reportedly adopting this approach in her trade with other BRICS (Brazil, Russia, India, China and South Africa) countries; we can look into their exchange rate risk hedging arrangements to help drawing up hedging arrangements suitable for intra-Union trade settlements in ACU currencies. All ACU member central banks are also financial sector regulators; it should not therefore be too difficult for us in this forum to act concertedly towards expanding presence and engagement of banks and financial institutions of ACU member countries in each other's territories, deepening trade and investment cooperation.

(The 41st board meeting of the Asian Clearing Union (ACU) was held at Kathmandu, Nepal on May 17, 2012. Dr Atiur Rahman, Governor of Bangladesh Bank, made 'Bangladesh country presentation' at the meeting. This article is adapted from the presentation.)

The Financial Express/ Bangladesh/ 20th May 2012

Bangladesh Bank (BB) has increased the interest rate for green banking aiming to encourage the commercial banks to strengthen disbursement of the loan under its refinance scheme, officials said.

Under the new provisions, the interest rate on bio-gas and cattle farming has been fixed at 11 per cent from the previous 9.0 per cent.

"The decision on raising the interest rate will help to bring a positive impact on disbursement of the environment-friendly loan," General Manager of the Agriculture Credit and Financial Inclusion Department of BB Nirmal Chandra Bhakta told the FE Saturday.

The central bank has, so far, disbursed around Tk 600 million loans under the refinance scheme from the total fund worth Tk 2.0 billion.

BB launched the Tk 2.0 billion scheme on August 3, 2009 to facilitate renewable energy and environment-friendly projects.

A single commercial bank can borrow up to Tk 500 million from the central bank's revolving fund.

BB is advising the banks to take more loans from the revolving fund and finance the green and environment-friendly projects like bio-gas plants.

The BB has directed chief executive officers (CEOs) and managing directors (MDs) of all scheduled banks and non-banking financial institutions (NBFIs) to implement the new interest rate immediately through its circular Thursday last.

The disbursement of loan under the scheme slowed down as per the previous interest rate arrangement due to apathy from the commercial banks.

"The decision of interest rate increase will hamper not only loan disbursement but the sector as well," a stakeholder said.

The banks will now disburse the loans at 11 per cent interest instead of 9.0 per cent if they do it directly to clients, said the circular.

The circular said the increase of interest rate is mainly to promote bio-fuel production and the expansion of the sector by setting up bio-gas plants in rural areas. The bio-gas plants will be set up by taking a comprehensive cattle farming initiative.

The circular also said that the commercial banks would not be able to charge in addition to the interest rate from the clients in the name of any service charge.

The government wants to meet up 5.0 per cent of total power demand from the green energy by 2015 and 10 per cent by 2020.

Under the scheme, banks and financial institutions can get loans at 5.0 per cent interest from the central bank.

The Financial Express/ Bangladesh/ 20th May 2012

Bangladesh Bank (BB) has directed all the dealer banks to remain alert against transfer of funds abroad by the owners of Jubo Karmasangsthan Society (Jubok) by selling Jubok assets.

The Foreign Currency Policy Department of BB, through a circular recently, advised the relevant banks to undertake utmost cautionary measures in this regard.

Activities of the controversial NGO, which owes a staggering Tk 23 billion to its clients, were suspended in 2006 on charges of illegal banking practices.

Rafiqul Islam, chairman of a commission formed to facilitate return money to the persons who invested in Jubok, recently said they have been failing to prevent some owners and associates of Jubok from selling properties of the now-defunct company.

The commission currently has no power to stop them, he said, adding that they will be empowered soon to stop such activities and take the assets under commission’s possession.

We are apprehending that the main bank accounts of Jubok are yet to be freezed and the company also has some deposits outside the banking system, Rafiqul said.

He, however, admitted that the commission has not make any remarkable headway in returning the dues of the depositors due to bureaucratic complications, lack of timely cooperation from Bangladesh Bank and manpower shortage.

The Daily Sun/ Bangladesh/ 19th May 2012