The extent of default loans increased in the third quarter due to tightening the loan classification guideline, sluggish business activities during the political uncertainty and interruption in energy supplies.

The classified loans increased by Tk44bn or 8% to Tk567bn in the July-September quarter from Tk523bn of the April-June quarter of this year, according to Bangladesh Bank data. The classified loan is about 13% of the total outstanding loan of more than Tk4tn.

The total classified loan was Tk510bn in March this year, which was Tk290bn in June, 2012.

“The classified loans increased due to tightening the guideline,” said a senior executive of Bangladesh Bank. Besides, sluggish business during the political uncertainty and lack of gas and electricity pushed the classified loans up, he said.

Bangladesh Bank Deputy Governor SK Sur Chowdhury said the commercial banks have classified the loans from March quarter following the international standard guideline issued by Bangladesh Bank.

He, however, said the banks have faced some problems to follow the new guideline. “They will overcome the problems gradually.”

According to the new guideline, banks have to classify the loans in three categories, included sub-standard, doubtful and bad or loss.

Of the total classified loans, four state-owned banks have Tk241bn, private commercial banks Tk223bn, specialised banks Tk87bn and foreign banks Tk14bn.

Of the state-owned banks, Agrani Bank’s classified loan stood at Tk51bn, which is 27% of the total outstanding loan; Janata Bank Tk47bn, which is 18% of outstanding loan; Rupali Bank Tk16bn, which is 17% of their outstanding loan; and Sonali Bank Tk125bn, which is 42% of their total outstanding loan.

Under the revised loan classification guideline, the general provision against all unclassified loans of small and medium enterprises (SME) has been set at 0.25% from the existing 1%.

Besides, the base for provisioning has been re-fixed at minimum 15% of the outstanding balance of a loan from 20%.

Under the revised provisions, the down-payment for the first time rescheduling of a term loan has been reduced to minimum 15% from at least 25% previously of the overdue installments or 10% of the total outstanding amount of a loan, whichever is lower.

The application for second time loan rescheduling will be considered upon receipt of cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of a loan, whichever is lower.

The application for third time loan rescheduling will be considered upon receiving cash payment of minimum 50% of the overdue installments or 30% of the total outstanding amount of the loan, whichever is lower. 

News:Dhaka Tribune/08-Nov-2013

The committee of secretaries on Tuesday submitted recommendations to the finance minister regarding a separate pay scale for the employees of the Bangladesh and the four other state-owned commercial banks.

Sources said after the finance minister has given his consent, the recommendations would to the prime minister.

The employees of these banks, however, have been strongly opposing the proposal for separate pay scale saying the general pay scale for the government employees is better for them.

An official of the banking division of the finance ministry said: “Most employees of the state-owned commercial banks Sonali, Janata, Agrani and Rupali and the Bangladesh Bank expressed fears that they would not be able to take enough money back home, resulting in a fall in their living standards. Because under the separate pay scale, they would have to pay income taxes and there would not be some of the key bonuses and allowances.”

Finance Minister AMA Muhith on Tuesday said the government would simultaneously implement the national pay scale for government employees and the separate one for the government banks.

Dr Aslam Alam, secretary of the finance ministry’s Bank and Financial Institutions Division, told Dhaka Tribune: “Implementing the separate pay scale will take time because of two reasons: firstly, most of the employees of Bangladesh Bank and the state owned commercial banks are opposing the move as they want to stay under the purview of the national pay scale.

“Secondly, the Bangladesh Bank is currently under the national pay scale. It will have to come out of that for enabling the implementation of the separate pay scale.

“I have talked to the employees of the state-owned commercial banks and the Bangladesh Bank. They have told me that they were wondering why the government was thinking about implementing a separate pay scale hastily.”

He added that the implementation would not be very easy because the proposed separate pay scale had some issues that needed to be solved.

The committee of secretaries, headed by Cabinet Secretary Musharraf Hossain Bhuiyan, last month decided that the employees of the government banks would have to pay income taxes and their salaries would rise by Tk2,000.

However, the finance minister had hinted before that the government bank stuffs would get a much bigger hike.

At present, the four government commercial banks have 90,000 employees, while the central bank employs about 6,000, sources said.

News:Dhaka Tribune/06-Nov-2013

Bangladesh Bank (BB) is preparing a guideline to help banks check forgery in online banking.

The new guideline is likely to be issued next month, a central bank official told BSS on Sunday.

The central bank is issuing the guideline against the backdrop of some incidents of credit card forgery and fraudulent transactions at ATMs.

Under the guideline, banks will be advised to follow a set of measures to protect their clients from fraudulent activities in online transactions.

Among the measures, the banks would be asked to develop a system from which their clients would get instant message (SMS) and email immediately after each and every online transaction.

Currently, some banks are providing similar services at their own initiatives to protect the interest of their clients and to ensure secured online banking.

“But, all banks should provide their clients with similar services after issuing the guideline,” the BB official said.

He said SMS and email should be sent to the respective clients against their transactions by using debit or credit cards at the ATMs (automated teller machines) or PoS (Point of Sales). 

News:Dhaka Tribune/04-Nov-2013

Non-financial businesses, including gold and real estate, will have to send reports of transactions they deem suspicious to the central bank from now onwards as part of the government’s efforts to combat money laundering and terrorism financing.
Bangladesh Bank yesterday issued a guideline to be applied by all real estate developers, business firms dealing with valuable metals and stones, trust and company service providers, lawyers, notary and other law professionals and accountants.
For instance, if a real estate developer becomes suspicious of the buyer’s source of money, it would immediately have to send the transaction’s report to the central bank.

The guideline, which was prepared in light of Anti-money Laundering Act, 2012 and Anti-terrorism Act, 2009, will be available in the website of the central bank and has been sent to the presidents of the concerned businesses and professional organisations.

News:The Daily Star/02-Nov-2013

The central bank has asked the commercial banks and non-banking financial institutions (NBFIs) to disburse loans under the Japan International Cooperation Agency (JICA)-funded project for improving infrastructure and doing safety assessment in the country's apparel and clothing sector.

"We're ready to release the fund to the participating financial institutions (PFIs) under the project," Mr Masum Patwary, acting general manager of the SME and Special Programmes Department of the Bangladesh Bank (BB), told the FE Wednesday. 

Mr. Patwary also said the central bank would approach development partners for arranging further funds for the project to confirm success of it.

The central bank issued a notification in this connection Wednesday and asked the banks and NBFIs to take necessary measures for sanctioning loans in line with the related operating guidelines. 

Currently 39 banks and NBFIs are eligible for disbursing the loans under the project to interested RMG entrepreneurs for the purpose of retrofitting, rebuilding and relocating their factory buildings. 

"We expect that four banks and one NBFI will sign memorandums of understanding (MoUs) with the central bank shortly for disbursement of the fund," another BB official noted. 

The JICA has already provided Tk 1.0 billion as a soft loan for improving the working environment in the country's ready-made garment (RMG) sector. 

Under the project, an entrepreneur will be given maximum Tk 1.0 million as a soft loan at the maximum interest rate of 10 per cent to develop infrastructure for their garment factories. The loan will be repayable in 15 years including a two-year grace period. 

An MoU was signed to this effect by the JICA, the central bank, Public Works Department (PWD) under the Ministry of Housing and Public Works, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) at a hotel in the capital on October 3. 

The funding is aimed at providing financial support to the RMG enterprises for conducting safety assessment of their buildings under the supervision of JICA experts and engineers of the public works department under the Housing and Public Works Ministry. 

The central bank has taken the latest initiative against the backdrop of the Rana Plaza collapse at Savar in Dhaka on April 24 last, where more than 1,100 people died and hundreds were severely injured.