Rejaul Karim Byron

The Bangladesh Bank (BB) has detected various irregularities in commercial banks, including waiver of the principal amount of loans, and warned the banks against such malpractices.

The irregularities found through an investigation were presented at a meeting of the chief executives of all banks yesterday with the central bank Governor Atiur Rahman in the chair.

The irregularities were projected on the basis of the central bank's inspection to bank branches at different times.

The banks normally exempt the interest on loans but cannot forego the principal amount. The BB inspection also found incidents of waiving the principal amount.

Though the classified loans were not recovered, the banks were putting those as recovered to show a big amount of profit. Besides, the irregularities detected by the BB included granting loans to defaulters, and rescheduling classified loans without down payment.

The central bank also found that after giving fresh loans, the banks adjust the old loans, which is a big malpractice, BB officials said. The banks often declassify classified loans without following central bank rules, they said.

After the meeting yesterday, BB Deputy Governor Nazrul Huda said the real situation is not being reflected in the balance sheets of the banks due to such irregularities. He said: “We have asked the banks to be cautious in future; otherwise we will be tougher.”

In the meeting, various issues including the banks' liquidity and their exposure to the capital market were discussed.

Huda told journalists that the banks do not have any liquidity crisis now, though one or two banks are facing a little pressure. He said the amount of excess liquidity is about Tk 28,000 crore now and the rate of interest in call money market is between 4 percent and 6 percent.

The BB deputy governor said fresh money is being injected into the money market every day as the government's development expenditure is increasing now. The government has already released Tk 1,500 crore development funds, which gave a rise to liquidity in the banks.

Huda said export receipts are lagging behind export shipment by nearly $2 billion. Normally, the banks bring back the export receipts to the country within four months. “We have asked the banks to take initiative to bring back the export receipts in one month, giving special efforts to further improve the liquidity situation.”

In the meeting, the BB governor said: “I would strongly urge the bank CEOs to direct their export desk staffs in the respective branches to be active in timely collection of export bills from abroad.”

The governor also said the central bank will ease further the pressure on the taka-dollar exchange rate and interest rate.

Huda also said the credit-deposit ratio was beyond limit in different banks but it has come down. Now the ratio is above 85 percent in nine banks.

If the present trend continues, the credit-deposit ratio of these banks will come down below 85 percent by June, he added.

Huda said the ratio in 26 banks was above 85 percent only a few months back. He also said, another positive note was that the overall credit-deposit ratio of the banks is 82 percent.

The BB deputy governor said no bank has over-exposure to the capital market now.

The central bank has already started working on the basis of the share market debacle probe committee report. The BB will also form an investigation committee. If any irregularity is proved against any bank, the BB will take action.

Huda said the banks were advised to launch a new product to provide financial assistance to the Bangladeshi migrant workers who returned home from Libya.

The Association of Banks Bangladesh (ABB) will prepare the product after discussion.

Banks will have to face punitive action if they fail to maintain the advance-deposit ratio prescribed by Bangladesh Bank (BB), the apex bank governor, Dr Atiur Rahman, said on Wednesday. According to a BB directive, the ceiling for advance-deposit ratio is 85 per cent for conventional banking, and 90 per cent for the Islami Shariah banking. Banks must maintain the statutory liquidity ratio (SLR) at 19 per cent in case of conventional banking and 11.5 per cent for Islami Shariah banking, which allow credit disbursement up to 81 per cent and 88.5 per cent respectively.
“Banks with advance-deposit ratios above 85 per cent must fall in line, by June, by raising deposits and scaling down lending commitments, or else they won’t be allowed to open new branches and expand business, Rahman said, at a meeting with bankers at the central bank office. They will also face downgrading of their Camels rating and the usual penal action as per the Bank Companies Act," he added.
The governor, during a meeting with bankers in the capital, told them to cut lending for non-essential and unproductive purposes. However, there are some complaints about loans being refused summarily for ongoing productive activities and for essential imports, he pointed out.
Rahman also expressed disappointment over the inefficiency of banks to collect export payments timely, which is resulting in difficulty in payment for imports. He said export receipts are lagging behind export shipments by nearly US $2 billion.
The governor urged the bank CEOs to pep up their export desks so that they could timely collect export bills from abroad in order to meet import bill payments.
"There is much that banks themselves can and should do to improve market liquidity further by hastening repatriation of proceeds of booming exports of their clients," he said.
Hastening collection of even a fraction of the huge amount ($2 billion) will ease market liquidity considerably in terms of both taka and forex. And this would, in turn, ease pressures on taka exchange rates and interest rates, he added.
Rahman said he would welcome a proposal jointly by two key players in the banking sector, Bangladesh Association of Banks (BAB) and Association of Bankers Bangladesh (ABB), for a revision of the decade-old BB guidelines on minimum required standards of management of core risks.
"With a view to eliciting stronger engagement and ownership of actual users of the guidelines in the banking community, we would like to see ABB and BAB jointly take the initiative in this ragard," he said.
BB staff in the regulation and supervision departments will extend necessary support in this regard. BB deputy governors Nazrul Islam and Murshid Kuli Khan, and managing directors of Janata Bank, City Bank and Pubali Bank, SM Aminur Rahman, K Mahmood Sattar and Helal Ahmed Chowdhury, respectively, joined the meeting, among others.

News: The Independent/ Bangladesh/ May-12-2011

The central bank launched an automated clearing house at its office in Barisal on Sunday for faster settlement of transactions and payment systems as part of its move to digitalise the country’s banking system.

Twenty six branches of commercial and scheduled banks in Barisal came under online system of Bangladesh Automated Clearing House (BACH) at Bangladesh Bank (BB).

The system will significantly reduce settlement time from three days to only two hours.

“We moved one step ahead of many other countries by introducing this modern technology-based payment and transaction system,” BB deputy Governor Murshid Kuli Khan said while inaugurating the clearing house as chief guest at the central bank’s Barisal branch office.

Golam Mostafa, general manager Barisal BB presided over the progamme.

Dasgupta Asim Kumar, executive director of BB, Mohammad Akhlasuddin, deputy director of BB, Majibur Rahman, GM of Kirishi Bank, Mominul Huq, VP of NBL, Biswadev Manadal, zonal head of Janata Bank, and other high officials of public and private commercial, schedule and specialised banks were present.

The Department for International Development (DFID) of United Kingdom funded $8.5 million to implement the Bangladesh Automated Clearing House (BACH).

The deputy governor of BB stressed on ‘green banking’ for the coastal and southern region of the country.

He said the main benefit of the new BACH system will go to the business firms and to the remittance earners as they will get their payments within a day instead of waiting for a number of days. This will facilitate the online banking as well.

BACH system is based on latest state-of-the art technology. It’s a most secured system,’ he said.

The BB deputy governor also said the existing clearing system would also continue alongside the new one.

He said the new automated system will contribute one per cent to the GDP through expediting the business transactions.

Under the new automated system, banks will get rid of sending cheques physically to the clearing house at the central bank for fund transfers. Now, the banks can do the job online from their own offices using machine readable cheques and the funds will be transferred electronically.

However, the banks can also drop their cheques at the BACH at Bangladesh Bank where the machine can take image and data of 300 cheques per minute.

The new magnetic ink character recognition encoded cheques have already been introduced by different banks to integrate with the new system, sources said. The encoded cheques will reduce the cheque clearance time to only two hours from the two days required so long, the source added.

News: Daily Sun/ Bangladesh/ May-08-2011

Bangladesh Bank has been making efforts to have the people rational on inflation in the context of current global economic situation by preparing half yearly monetary policy report, said a central bank’s statement.

The statement presents an evaluation of the BB’s activities and initiatives taken during the last two years since Dr Atiur Rahman took office as Governor in May 2009.

Apart from conventional regulations, BB went for a sustainable economic development through financial inclusion, poverty alleviation, human resources development along with stabilising the financial sector, it said in the evaluation.

Standard and Poor's and Moody`s, two internationally recognised credit rating agencies, has positively rated Bangladesh BB-and Ba3 respectively in two separate sovereign rating, highlighting world appraisal of country’s economic resilience as well as opening up a horizon of possibility.

The Central Bank’s shifting includes policy level, legal and institutional activities to address the macro-economic challenges, since May 2009 when Dr Atiur Rahman took office as BB chief.

Three key objectives were considered in formulating the monetary policy: reining in inflation, attaining inclusive and equitable economic growth and maintaining overall financial stability.

On the new world economic threshold, BB is revealing half-yearly monetary policy statement for a more pragmatic one to cope with new challenges.

Monetary and credit policies have been made more active to expand financial inclusion along with enhanced financing to agriculture and small and medium enterprises (SME).

Agro sector witnessed both the quantitative and qualitative changes in last two years/since May 2009

A Taka five-billion re-financing scheme, for the first time, to made credit available for the millions of sharecroppers, who are usually left out of the facility.

1,26,686 marginal farmers received more than Tk 2.18 billion as agri-loan up to March 2011.

Besides, farmers are provided with two-percent-interest loan to grow import substitute spices, which is also considered a great success for the regulator.

In 2009-10 fiscal year banks achieved 97 percent of their agro loan disbursement target while they have fulfilled 73 percent of the target in first nine months of current fiscal year.

A major move to financial inclusion is letting marginal farmers open bank accounts with only depositing Tk 10, giving an end to years of deprivation of government subsidies meant for them. Freedom fighters also got the same facility to receive their allowances hassle-free.

9.3 million farmers have so far opened such accounts to enjoy government subsidies and other banking facilities.

From March 2009 to February this year, 764 new bank branches have been opened across the country to make people enjoy financial facility at their doorsteps. Moreover, a new bank-- ‘Expatriate Welfare Bank’ has been opened targeting overseas jobseekers.

SMEs got special priority as BB opened a dedicated department for SMEs. In 2010 it formulated an elaborated policy for SME credit.

Solar energy, bio-gas, effluent treatment plant (ETP), non-polluting brick kilns--all drew special attention of BB under its green financing initiative of creating a Tk 2-billion revolving fund, of which, banks have managed to disburse only Tk 110 million.

BB, meanwhile, issued green banking guidelines to banks and NBFIs to ensure green financing.

A systematic reform in the BB run Equity and Entrepreneurship Fund (EEF) to make dynamic has led to financing of Tk 7.09 billion to 430 agro and 16 ICT projects

Spending Banks and financial institutions under the CSR activities rose to Tk 3.91 billion in 2010, from Tk 550 million in 2009, because BB has made this mandatory for them.

A five-year strategic plan has been chalked out for a more dynamic, efficient & resilient financial system, which strenthenged BB’s regulatory and surveilence structure.

Basel-II implementation is underway in banks and financial institutions to make them more stress tolerent. Regular CAMEL rating and stress testing are also on.

BB’s strict monitoring and active role to keep balance between demand and supply of foreign currency have made the exchange rate stable, while remittance inflow and trade blance remain in favour of the country.

In last two years BB was relentless in its efforts to establish a secure and modern automated payment and settlement system.

Online banking, mobile banking, e-commerce, e-tendering, e-recruitment, automated clearing house, electronic fund transfer (EFT) and online CIB has already been introduced as part of a digital banking system.

News: Daily Sun/Bangladesh/ May-04-2011

Lending rates by banks are expected to come down by June-July once the import of capital goods and food grains cools down, said Bangladesh Bank Governor Atiur Rahman in New Delhi yesterday.

Talking to a group of journalists, Dr Rahman made it clear that the banking regulator would not allow a hike in lending rates to affect economic growth adversely.

Replying to a question, he said after a lull, the import of capital goods and food grains has gone up but they should cool down in another two months.

Rahman, who is in the Indian capital to attend an international seminar on fiscal deficit, was responding to questions on worries among Bangladesh industries and business about the rising lending rate.

He said taming the inflation is a priority of the Bangladesh Bank and pointed out that while food inflation is 10 per cent, the non-food inflation is 3 and half per cent. The Bangladesh Bank is "morally asking the banks not to raise the lending rate beyond 14 per cent" because the rate in Bangladesh is market-driven, he added.

"I have requested the banks to lower the interest rates to make it comfortable for the industry,” the governor said. Rahman ruled out considering removing the cap on lending rates for sectors other than the existing two introduced by his predecessor governor.

Replying to a query on microfinance and the Grameen Bank headed by Dr Muhammad Yunus, Rahman said the Bangladesh Bank "does not have any bad feelings about the microfinance sector".

"We want microfinance to be humane and not an exploitative machinery as it is in several other countries.”

Rahman said the microfinance sector in Bangladesh is being regulated in a transparent and well-laid out manner and "the flat rate of interest is coming down, giving a lot of relief to the poorest of the poor people".

Asked if the Bangladesh government is willing to reach a compromise with Grameen Bank founder Yunus, Rahman said the question should be directed to the Bangladesh government.

Rahman said Bangladesh plans to float infrastructure bonds to rope in investment to develop the currently laggard infrastructure which, along with energy shortage, has been among the major challenges for the government to fuel the economic growth.

"If we can solve the infrastructure and energy problems, we can get a lot of foreign direct investments which are going to China and India because Bangladesh has cheaper labour and has more cost-competitive advantage compared to India and China," he said, adding, labour cost in Bangladesh, especially in apparel, ceramic and shipbuilding sectors, is one-third of that in China and half of that in India.

"I don't think anybody can beat us in this in a decade," said Rahman. As he said, Bangladesh Bank wanted an "inclusive monetary policy as financial inclusion is our top priority".

News: The Daily Star/ Bangladesh/ 19-Apr-2011