Accelerated customers services in Rajshahi Krishi Unnayan Bank (RAKUB) is very vital for boosting agricultural production everywhere in the country’s northwest region.

This was stressed in the 373rd meeting of the board of directors of the Bank held at its board room with its board chairman Prof Dr Shah Nawaz Ali in the chair here on Monday afternoon, the meeting sources said.The meeting also emphasised that all the existing agricultural potential sectors should be brought under qualitative and quantitative financing for making the country’s northwest region economically solvent.

The meeting also noted that the Bank’s administrative and operational activities must be transparent and accountable alongside farmers-friendly for boosting agricultural production.For the sake of sustainable livelihood development of the farmers and for bolstering the agro-based economy, the meeting called for increasing the qualitative and quantitative credit flow.  

The meeting discussed elaborately on how to make the Bank’s operational and commercial activities more dynamic through strengthening the credit support for both farm and non-farm prospective fields. Managing director of the bank Prodip Kumar Dutta, directors Khandaker Jahangir Kabir Rana, Abdul Mannan and Dr Rustam Ali Ahmed attended the meeting.

Deputy managing director Siddiqur Rahman, Mosharraf Hossain Chowdhury, general manager (Administration) Ekramul Haque, general manager (Audit, Accounts and Recovery) Nishit Kumar Shaha, general manager (Operation) Habibur Rahman and council-secretary AB Siddiqui were also present.

The Daily Independent/Bangladesh/ 11th Jan 2012

A group of specialist banks are profiting from Europe’s financial crisis, thanks to a surge in demand for securities which allow traders to bet against bank stocks and government bonds.

The so-called custody banks that administer securities, a normally unglamorous and low-margin business, include BNY Mellon, JP Morgan and State Street .The banks, as well as loan specialist Equilend, take a fee for linking lenders with surplus stock—typically pension funds—with borrowers such as hedge funds and banks, who want to position themselves in markets by short-selling.

Pension funds and insurers have become increasingly attracted to lending by the fees they accrue from the borrowers at a time when equity returns are off.The latter want stocks or bonds to sell them in the hope that their price will fall over time.

The Daily Independent/Bangladesh/ 11th Jan 2012

New banks are necessary to curb monopoly in the sector. Such banks offer financial services at a low cost for the unbanked population and stimulate healthy competition throughout the region. Ekramul Haque, managing director (MD) of Al Arafah Islami Bank Ltd (AAIBL), said this in an exclusive interview to The Independent on Monday.

The central bank should play an effective role in checking unethical techniques practised by banks, as new banks would provide cutting-edge competition. Under the government’s directives, the Bangladesh Bank (BB) decided to issue licences to several new banks in October last year. This evoked heated debate among economists, banking personnel and civil society members.

So far, the central bank has received about 37 applications in this regard. The applications would soon be scrutinised by a technical committee. Commenting on the issue, Haque said new players in the banking sector will benefit depositors, as the rate of interest offered by banks for deposit mobilisation would increase. On the other hand, the lending rate will be competitive as banks must sale its money that was bought from depositors, he added.

New banks would also address the unemployment problem by creating jobs  for hundreds of educated young people. “Currently, some banks are enjoying monopoly in making profit. As a single company, a bank cannot earn enormous profit,” he pointed out. “Records show that many banks have earned profit over Tk. 500 crore in a single year, as in 2011. At the year-end, banks disburse high dividend to share holders. Such profits result from absolute monopoly in the banking sector.

This ought to stop,” he observed. The high rate of interest is not congenial to the growth of industry, trade and commerce. Aggressive profit making tendency should end for a steady growth of the banking sector. At present, a bank’s management is under tremendous pressure to fulfil the annual profitability target, he added. A healthy competition in the banking sector is indispensable to curtail such unhealthy pressure and lower the cost of financial services. This would bring more unbanked people under the sector’s coverage, he added.

“The regulator should remain alert to check unethical practices adopted by banks after new players start their operation,” Haque cautioned. Since he took over charge of the AAIBL 17 months ago, Haque has turned the problem-gripped Bank into a profitable one. In 2011, the Bank’s profit increased to Tk. 450 crore from Tk. 290 crore in the previous year. Of this, the proportion of pure Bank business has been doubled to Tk. 411 crore, compared to Tk. 198 crore in 2010.

In 2012, the Bank has set its profit target at Tk. 400 crore. “All financial indicators of this Bank were showing downward trends. I’ve brought dynamism and generosity among Bank employees and revised some policies that brought significant results and made the Bank profitable,” said Haque. After making profit, the board of directors of the Bank awarded its employees a pay-scale, raising their salaries to present market standards. 

He said the Bank’s classified investment is the lowest among all banks in Bangladesh. Classified investment declined to 1.08 per cent by the end of December 2011, which was 1.14 per cent at the end of 2010 and 1.68 per cent at the end of 2009.“To bring success in the banking business, one should maximise profit, keeping in mind the regulatory aspects,” he remarked.

The AAIBL and its employees no longer take part in share trading. Instead, they concentrate on pure banking business. He said the Bank, at its 88 branches, has introduced complete online services for clients to deliver servives as quickly as possible. He described the AAIBL as a second generation Bank. The Bank started its operations in 1995, and has been ranked 8th among 10 Banks, according to CAMEL rating in 2011.

Haque said the Bank has spent Tk. 14.5 crore on Corporate Social Responsibility (CSR) activities. It has established a kidney dialysis centre at the city’s Topkhana Road and plans to set up another unit in Chittagong soon. Besides, each new branch of the Bank will distribute 15 solar panels free of cost in rural areas, in order to help poor households outside the electricity-covered area.

The Daily Independent/Bangladesh/ 11th Jan 2012

 Brushing aside main opposition BNP’s claim that the country's economic condition has become  vulnerable, Bangladesh Bank (BB) governor Dr Atiur Rahman on Tuesday  said that  the economy is still in a  better position.

"Some quarters have been spreading 'false' propaganda against the country's present economic condition,” the central bank chief told  a  discussion, organised by Bangabandhu Foundation, Bangladesh Bank, in memory of  the veteran Awami League leader Abdur Razzak in the city.Atiur said, "The foreign currency reserve was 2.2 billion dollars during the first three years of the BNP-led government. But it stood at $10 billion during  the last three years of the AL- led government."

 He noted the per capita income was 18-19 percent during the  BNP-led government but now  it has exceeded 25 percent. The disbursement of agriculture loan has been raised by 30 percent compared to the BNP regime, The BB governor observed that the present government has brought the country's rate of  poverty  to 31 percent from 40 percent.

 "It is a great achievement of the present government," he added.But he admitted that the Bangladesh is yet to get any foreign aid this year because of global   recession.The memorial meeting, chaired by Delwar Hossain Khan Razib, the foundation president, was also addressed by eminent journalist Abed Khan and labour leader Manjurul Haque. Earlier on Monday, the central bank released explanation on its contractionary Monetary Policy Statement (MPS), which will be continuing for the second half of the financial year 2011-12. 

This MPS aims to bring down the double-digit inflation to a single-digit one by the end of the current fiscal.Bangladesh Bank (BB) explains that high cost of food at both domestic and international markets¸ reduction of government subsidy to fuel and fertiliser, good flow of remittance and devaluation of taka against dollar are contributing to high inflation rate.

The bank forecasted that the inflation rate would become static in the coming months of the fiscal and will get a downturn in the last three months of the fiscal due to the tough Monetary Policy Stance taken by central bank and an ongoing gloomy economy in European countries.It said the BB’s  Net foreign Investment Reserve (NIR) and Net Foreign Asset (NFA) take a negative flow due to the reduction of foreign assistance for government's deficit financing along with depreciation of taka against dollar, low reserve situation and high inflations.

 Taka devaluated about 15.5 percent against dollar in 2011, which increased cost of importing goods and put further pressure on the skyrocketing inflation. The bank in the first three months of the fiscal poured about US$636 million from foreign exchange reserve to the market to reduce the depreciated pressure on the money.

 According to the MPS, BB said it has to follow a tight liquidity regime in the monetary market. As part of the stance, the bank supports liquidity by repo to only government primary dealer banks instead of all commercial banks and financial institutions.The special repo is open for only limited scale against high interest.It said due to the crunch in liquidity and opening a free limit for interest rates the central bank will strictly vigilant against banks so that they shall not impose interest rate at a level which would create sufferings to the clients.    

The BB said the MPS would influence lifestyle to the elastic group of consumers and the existing gloomy European economy will help reduce food price to Bangladesh which will ultimately help reduce the inflation rate.It said the current government borrowing from banking system does not put it at risk level but if the government increased its borrowing further it would pose a serious risk to the private sector credit.

The Daily Independent/Bangladesh/ 11th Jan 2012

The World Bank (WB) has said the proposed amendments to Bank Company Act and Financial Institute Act lack a holistic approach, risk management provisions and structural arrangement to deal with the local and global financial issues.

It has advised the Bangladesh Bank (BB) to redraft both the amendments to suit those well with the fundamental needs of the financial sector.

The findings of the World Bank have recently been submitted to Bangladesh Bank (BB) after a mission of WB styled, 'Central Bank Strengthening Project Implementation Support Mission', had completed its three-week visit to Bangladesh recently.

However, the WB has hailed the move to amend the acts.

"These amendments fail to incorporate new areas to strengthen the law such as effective minimum requirement for licencing and procedures, fit and proper requirements, systematic prompt corrective action and resolution process, become compliant with Basel Core Principles and include lessons learned from the global financial crisis," reads the report of WB on draft amendment of Bank Company Act (BCA), 1991.

Besides, the findings of WB said the proposed amendments also reflect a number of knee-jerk reactions to the current issues confronting BB supervisors instead of taking a holistic, strategic, long-term view for an effective and practical legal framework for the banking system.

"In many areas the amendments deal with controlling business decisions of banks rather than risk management and stability issues, the findings said further," the WB said.

The WB on the draft amendment to Financial Institute Act (FIA,) 1993 said the draft act suffers from serious policy, structural, drafting and definitional lapses.

"Key policy decisions such as the underlying legal reasoning for including certain type of business and excluding some in the definition of 'finance business', the regulatory role that BB will be assuming under the law, rationale for ownership control of these institutions, structural arrangement of these companies in relation to a bank, consumer protection aspects, the scope of rule making, safety net and resolution of failed institutions are absent and or unclear in the draft law," reads the WB report.

However, WB said the attempt to define the financial institutions by their activities, streamline provisions on licencing and other prudential measures, powers of BB dealing with sanctions and troubled institutions is a step in the right direction.

BB has recently drafted amendments to BCA, 1991 and FIA, 1993. The draft amendment of BCA, 1991 has restricted the number of directors of a bank to 13, while it reduced exposure of a bank to the capital market.

The proposed amendment to FIA, 1993 has fixed Cash Reserve Ratio (CRR) of a financial institution at 20 per cent, limited the number of directors to 13 and fixed the tenure of a director up to three years, sources said.

A senior official at the BB said they were scrutinising the recommendations of WB.

"The reasonable and realistic suggestions of WB will be accommodated in the way of amending both the acts," an Executive Director of BB told the FE on Monday.

He said under the prevailing financial crisis abroad, the BB is willing to tighten the regulations for local banking companies and financial institution.

The Daily Financial Express/Bangladesh/ 10th Jan 2012