Bangladesh Bank Governor Dr Atiur Rahman yesterday came down heavily on senior BB officials for not taking stern actions against errant banks and NBFIs, and stressed on strict monitoring to ensure financial stability in the sector.

“I see most of you are young. Have you lost your teeth? How many banks have you fined so far or tracked frauds there?” the Governor aksked BB officials.

He was speaking at the inaugural session of a workshop on “Contemporary Challenges in the Banking Sector and Supervisory Stance” at city’s Bangladesh Bank Training Academy (BBTA) auditorium in the morning.

“You shouldn’t have any hesitation in taking tough actions against any irregularities in the banking sector while you are being continuously assured of full support from the top level,” he said, adding that any professional problems regarding this will be looked into. “You don’t need to be too much humane to those who are violating the laws,” he told the officials.

Department of Off-Site Supervision of BB and BBTA jointly organised the meeting with concerned officials to formulate a timely supervisory framework.

News: Daily Sun/ Bangladesh/ 18-Sep-11

Hasibul Aman

Bangladesh Bank (BB) has injected fresh fund into the money market to meet an extra demand ahead of Eid as well as helping ease the heated call money market.

The inter-bank call money rate was stable on Wednesday despite of withdrawing pressure of cash from the banks ahead of the Eid-ul-Fitr festival, treasury officials said.

The central bank last week provided the banking sector with a daily liquidity support of Tk 80 to 90 billion through repurchase agreements (repo), Tk 10 to 15 billion higher than that of previous week.

The excess pumping of liquidity into the money market was eying on meeting an extra demand ahead of the country’s biggest religious festival.

“The total amount of daily liquidity supply through repo currently jumped to Tk 80 to 90, which is Tk 10 to Tk 15 billion higher than the normal volume,” an official of Securities Department of BB said on Thursday.

Another BB official said there is no liquidity shortage and the money regulator is supplying as per the demands of the market to negotiate the extra pressure on liquidity from the demand side before the biggest Muslim festival. “Bangladesh Bank, as the lender of the last resort, is providing repo as soon as banks are demanding,” he said.

He also informed that the inter-bank call money rate was hovering around 17 percent on average last week, soaring from 7 to 8 percent in the previous week.

But the lending rates among banks reportedly hit 25 percent on Thursday.

The rate, however, already surpassed the lending cap set by the regulator. Earlier in January this year, BB put a ceiling on the inter-bank lending rate at 12 percent to avoid volatility in the banking sector.

The BB official said it is usual that call money rates heat up before the Eid, the highest demanding period of liquidity.

It is not appalling, if the rate rises around 20 percent as the current lending rate for the public is nearly 16 percent. But it will be a problem if the rate soars to 25 to 30 percent, he added.

Call money rate hit a record high to 190 percent in mid December last year, leaving the money market in a volatile situation.

The rate took a volatile turn as the banks themselves dismantled their asset-liability management, for which many of them were show caused later by the regulator, the BB official pointed out.

The money market, however, remained comparatively stable this time as banks had been sent caution notes about the heated up liquidity market, BB sources said.

They were also repeatedly warned of bringing down their credit-deposit ratio (CDR) within the set limits, which might have contributed to the present comparatively eased liquidity situation, the official added.

News: Daily Sun/ Bangladesh/ Aug-27-2011

Bangladesh Bank (BB) has cautioned commercial banks against harassing people willing to change soiled and torn notes.
The department concerned of the central bank is receiving allegations from people that most of the commercial banks are reluctant to change their torn and soiled notes, said a BB official. “We’ve asked a commercial bank’s managing director to take punitive measures against the officials who are refusing to change torn or soiled notes,” said M Masum Kamal Bhuiyan, general manager of the department of currency management and payment systems of the central bank.
“As per BB’s rules, commercial banks are bound to change torn and soiled notes in all denominations and banks must hang a notice in each branch to provide people this service,” he added.
“No bank can refuse to give people such a service,” the official said, adding that the central bank would take immediate steps against the bank concerned if it gets specific allegations from aggrieved people.
He said the central bank often sends its officials on surprise visits to banks to stop harassment of people. It has been trying to increase the number of teams for surprise visits despite manpower shortage, the official added.
“The central bank’s inspection department officials have also been asked to monitor the matter when they go to inspect the operation of a bank branch,” the BB official said.

News: The Independent/ Bangladesh/ Aug-17-2011

Rejaul Karim Byron

The credit-deposit ratio (CDR) of commercial banks came down to a safe limit in June, as the surplus inter-bank deposits were included in total deposits.

The banks increased deposits and reduced credit, trimming the CDR further, said an official of the Bangladesh Bank.

Commercial banks are not allowed to invest more than 85 percent of their deposits, while Islamic banks cannot exceed the 90 percent limit.

On June 30, the CDR of 43 local and foreign commercial banks fell to 79.68 percent from more than 85 percent in December last year. In many banks, the ratio was above 100 percent.

The banks' overall deposits increased by 11.22 percent on June 30, compared to six months ago. Credit fell 6.20 percent.

The banks included Tk 7,605 crore in the total deposits in June, according to the central bank.

The banks increased deposits aggressively, and every bank cut lending consciously, which pared down the CDR rate, said K Mahmood Sattar, president of the Association of Bankers Bangladesh.

He said a few banks could reap the benefit of inter-bank deposits but most of the banks' CDR fell as they reduced credit.

The BB set a deadline for the banks to bring down the CDR to the safe limit by June to restore credit discipline. The bank owners met with Prime Minister Sheikh Hasina with an appeal to relax the rules.

The central bank relaxed the rules and said the banks can calculate inter-bank deposits in their total deposits.

The CDR by state commercial banks was 72.9 percent on June 30. Those banks included Tk 4,580 crore inter-bank surplus deposits in their total deposits.

The CDR of the private commercial banks was 82.92 percent and they included Tk 2,992 crore in the inter-bank deposits, while that of foreign commercial banks was 76.96 percent and they added only Tk 32 crore in the inter-bank deposits.

Of the 30 private commercial banks, only nine included inter-bank deposits of over Tk 100 crore in their CDR.

Analysts held the banks' excessive investment in the stockmarket as one of the causes, which pushed share prices to an unsustainable high. The central bank had since the first half of 2009 warned banks against parking excessive money in stocks.

Some officials of the Securities and Exchange Commission, stockmarket leaders and influential businessmen piled pressure on the BB to let the banks pour money into the stockmarket.

A total of 47 banks made operating profits of Tk 16,486 crore in 2010, with Tk 2,504 crore coming from the stockmarket, according to the central bank statistics.

The BB discourages the banks from any risky investment in an effort to cut credit growth, the high official of the central bank told The Daily Star yesterday.

As part of its overall monetary policy, the central bank takes steps to bring down credit growth to control soaring inflation, the official said.

News: The Daily Star/ Bangladesh/ Aug-14-2011

The banking division of the finance ministry has rejected the Bangladesh Bank (BB) recommendations on non-banking financial institutions (NBFIs) in the proposed act alleging that the central bank has not taken opinion from the stockholders.

“There is no sign of discussion with the stockholders of NBFIs in the proposed “Financial Institutions Act 2011,” said a senior official of the finance ministry.

He also said that the BB authority has not prepared the proposed financial institutions act with 35 provisions.

The banking division last week sent a letter to the governor of BB Atiur Rahman to revise the proposed Financial Institution Act 2011.

As per the letter, the banking division asked the BB authority to prepare the draft of the Financial Institutions Act 2011 with the consent of the stockholders of the non-banking financial institu-tions.

Earlier, the BB authority sent the proposal seeking opinion from the finance minister AMA Muhith.

According to the draft, the scope of business of NBFIs is going to be widened to enable those to contribute more to the economy and provide better services to clients. The range of the proposed “Financial Institutions Act 2011” is being expanded by including development finance, credit card, factoring and forfeiting under the law.

The proposed act imposes various restrictions regarding tenure and number of directors of the NBFIs like that in banks.

The government has taken an initiative to enact a new law replacing the 18-year-old Financial Institutions Act 1993.

According to the proposed act, in case of development financing, the NBFIs would be able to invest in new industries, agriculture and trade or any type of financial initiative. The NBFIs can get involved in factoring and forfeiting business also.

Factoring is a financial transaction whereby a business house sells its accounts receivable (such as invoices) to a third party (called a factor) at a discount in exchange for immediate money with which it continues business.

It is different from forfeiting only in the sense that forfeiting is a transaction-based operation involving exporters in which the firm sells one of its transactions, while factoring is a financial transaction that involves the sale of any portion of the firm's receivables.

As per the draft, no person, company or members of a same family can hold more than 10 percent of shares of any NBFIs either alone or collectively.

News: Daily Sun/ Bangladesh/ Aug-14-2011