The central bank on Wednesday imposed restriction on commercial banks regarding changes in deposit and lending rates. It also asked all the scheduled banks to go by the directives to keep deposit rates within 12.5 percent and lending rate 15.50 percent respectively.

In a circular, Bangladesh Bank (BB) said from now on, scheduled banks could alter the rate of interest for lending and deposit for once a  month.

Earlier, in a single month, banks could alter the rate of interest for multiple times on the basis of nature of investment and volume and period of deposit.

The ABB (Association of Bankers, Bangladesh) leaders in early February had reached consensus on interest rate for deposits at a maximum of 12.50 per cent and fixed the lending rate at a maximum of 15.50 per cent.

A BB investigation found that some banks have offered the interest rate for deposit more than the ABB decision and thus, realising the interest rate higher than the ABB rate. According to the circular, all schedule banks shall obey the ceiling on lending and deposit rates fixed by the ABB while banks shall have to send weekly statements on deposit to the central bank in a prescribed form, which is downloadable from BB website.

The statement must be signed by the chief executive officer of any bank concerned, the circular reads.

The Independent/Bangladesh/ 1st March 2012

The technical committee on opening new private banks will soon start collecting information of the applicants to know their eligibility to run financial institutions, a Bangladesh Bank source said yesterday.

The source said the committee, which was formed to scrutinize the applications for opening new banks, has already completed primary examinations.

The technical committee would send applications to the central bank’s evaluation committee after examining in detail.

Then the evaluation committee will take final decision to allow opening banks, according to the source.

In October last year, the BB invited applications from private sector entrepreneurs for opening new banks.

The central bank received 37 applications by Novem-ber 30.

The Daily Sun/Bangladesh/ 1st March 2012

IFIC Bank management has decided to increase the authorised capital of the Bank from existing Tk 5.35 billion to Tk 20 billion.

The board also has decided to amend clause VI of the Memorandum of Association and Clause V of the Articles of Association of the company subject to No Objection Certificate from the Bangladesh Bank.

The Daily Sun/Bangladesh/ 1st March 2012

Bangladesh Bank has recently directed the Securities and Exchange Commission (SEC) for boosting secondary bond market to meet the existing liquidity crisis of the banking sector.

A high official of BB on Wednesday said the cash flow will increase through more trading of bonds which could help overcome the fund crisis, also increasing share trading in bourses.

Some bankers said they are facing strong liquidity crisis as a large amount of funds, supplied to the government, were blocked.

BB statistics showed that government borrowed Tk 870 billion from different commercial banks up to February this fiscal.

“We are giving loan to the government for the periods of 5, 10, 15 and 20 years term, but government is giving us a so called bond just like a paper,” officials of the commercial banks said.

“On the other hand, government had formed secondary bond market for trading of the circulated bonds against loan. Now we could not exchanges the bonds as secondary market falls,” they added.

As per the BB’s statistics, bonds worth Tk 710 billion are lying in the commercial banks of the country.

But it was mandatory for the banks to deposit Tk 500 billion to the Central Bank, against their deposits. The highest interest rate of government Treasury bond is 9.75 percent. Most in most cases, bankers alleged, they are getting only 6 to 7 percent.

But Banks are collecting deposits at 14 percent interest rate to overcome the fund crisis, while taking short term loans from the call money market at an average interest rate of 20 percent, bankers said.

The central bank has directed the insurers to invest 30 percent of their funds to the bonds. At the same time, the central bank also suggested all financial institutions to invest a portion of their mutual funds to the bond market.

With increased investments from the insurers and FIs in line with the BB’s latest direction, the secondary bond market might see a boost, BB officials said.

The Daily Sun/Bangladesh/ 1st March 2012

Bangladesh Bank yesterday asked all banks not to offer any interest rate on deposits beyond the declared rate.

Some banks offered depositors interest rates beyond the declared ones, the central bank said in a letter to banks. The BB asked the banks to forward the interest rate on deposits every week in order for BB to monitor.

The interest rate on deposit and lending can be changed only once a month, according to the letter.

The Daily Star/Bangladesh/ 1st March 2012