Bangladesh Bank has issued licence to Agrani SME Financing Company Ltd, a subsidiary financial institution of Agrani Bank Ltd, to keep the ‘Small Enterprises Development Project’ functioning.

The new financial institution was awarded license on January 31 this year under the section 4 (1) of the Financial Institution Act, 1993.

With the emergence of the new company, the total number of country’s financial institutions rose to 30.

About the rationale behind BB’s move of awarding a fresh license amid a volatile financial sector, a BB official said it was only to facilitate SME activities of Small Enterprises Development Project.

In recent times, the existing financial institutes have been passing through turmoil situation as they mostly depend on call money market which recently witnessed a surge in interest rate by around 190 percent.

BB’s new move, however, might not be proved to be very effective in near future as the institution will have to compete with the existing companies having strong infrastructure and network, Akhter H Sannamat, a financial market analyst observed.

“I don’t find it necessary to open any new financial company now, though it might have some true special functions,” he said.

“There are many banks and financial institutions that already have penetrated into the SME sector. For the last six to seven months, BB also directed them to enter into the sector,” Sannamat said, adding that it would be very “challenging” for it to survive.

“The existing companies will find them in better positions as they have the necessary infrastructure and network but the new company has to struggle as it will take much time for it,” he also observed.

The cabinet on December 31 in 2009 approved a proposal on the formation of Agrani SME Financing Company Ltd by turning small enterprises development project into a subsidiary of Agrani Bank Ltd.

News: Daily Sun/ feb-07-2011

BRAC Bank, one of the largest private banks in Bangladesh has recently introduced their new service SME SMS Alert service. This service has surely opened a new window to the consumers. Through this service BRAC Bank's consumers can now get alerts about their loan updates regularly. This service will alert the small and medium business holders about their payment date of installments and the confirmation message of the deposit. In this era of technology this initiative is a worthy one as people remain busy in their work most on the time. An SMS alert will make the consumers aware about their loans and bank can collect loan deposit from the customers more easily.

For more help and 24 hour service they have also started their customer care line and the number is 16221. BRAC is already providing its consumers the Evening Banking service in more than one branches. Besides, they have multiple card facilities amongst which Travel Prepaid card, VISA card facilities are mentionable.

BRAC Bank also established a Kidney Research Institute in Mirpur, Dhaka which is dedicated to help the poor people. This institution has been inaugurated in 2010 as a non profitable institution. Amongst so many social activities these are very popular and BRAC Bank is extending its activities nation wide.     

Banks' capacity to protect depositors and promote financial stability is waning, according to a quarterly Bangladesh Bank (BB) report released last week. The report shows risk-weighted capital asset ratio (RWCAR), which is an important cushion against unexpected shocks, shrunk to 7.91 percent in June 2010 for all banks, from 11.68 percent in the same period a year ago. The present ratio is much lower than the minimum regulatory requirements of 10 percent under Basel II capital adequacy framework. RWCAR or capital adequacy ratio determines the capacity of a bank in terms of meeting the time liabilities and other risks, such as credit risks and operational risks.

Simply put, a bank's capital is the backing for potential losses that protects the bank's depositors or other lenders. Banking regulators in most countries define and monitor the ratio to maintain confidence in the banking system. Local bankers blamed the rise in risky investments on infrastructure constraints, particularly the gas crisis that has turned many lending bad. A foreign banker linked the current risky situation to a dramatic credit expansion without a corresponding increase in capital. “Banks' money borrowed by industries, which are not getting gas connections for months, became risks for those banks,” said Touhidul Alam Khan, executive vice president, corporate banking division of Prime Bank.

Latest BB data shows the RWCAR for all banks came down to 7.91 percent in June 2010 from 11.68 percent in the same month of 2009. The ratio was 11.67 percent in December 2009. State-owned commercial and specialised banks are in the worst condition in maintaining the capital ratio. For state-owned commercial banks the RWCAR has gone down to 5.67 percent in June 2010 from over 9 percent six months ago. It was negative 2.56 percent for specialised banks. The ratio for private commercial banks (PCBs) stood at 8.69 percent in June 2010, down from over 12 percent a year ago. It was 10.38 percent for PCBs in June 2004.

Although the ratio for foreign commercial banks (FCBs) still remains well above the minimum regulatory requirements, it went down to 16.71 percent at the end of June 2010 from 28.13 percent six months ago and 28.26 percent a year ago. “Any credit expansion without the corresponding rise in capital will increase the risk,” said a senior banker. He said banks' volume of lending has increased without supporting the adequate capital requirement. “The gas crisis cannot be the only reason. It has been a problem for the past few years and banks were lending considering the issue,” said the banker requesting anonymity.

Monzur Hossain, a research fellow of Bangladesh Institute of Development Studies, said: “Banks should strengthen the credit risk management, which is yet to get momentum."

News: Sajjadur Rahman/The Daily Star/Bangladesh/06 Feb 2011

The trading of 25 percent subordinated convertible bonds of BRAC Bank will start at Dhaka Stock Exchange (DSE) on February 8 under 'N' category as per the decision of the board of directors of DSE.

DSE Trading Code is "BRACSCBOND" and DSE company code is 26003 for the bonds.

The bank issued 3 million subordinated 25 percent convertible bonds of Tk. 1,000 each worth Tk. 300 million through repeat public offering (RPO).

The main objective of issuing the convertible bonds is to raise Tier II capital through repeat public offering in order to comply with the regulatory requirement of Bangladesh Bank.

The proceeds of the public offering will strengthen the capital base of the bank and augment business expansion. The fund thus raised would be generally used for undertaking regular commercial banking activities.

Maturity period of the bond is 84 months from the date of issue. The interest margin and the reference rate will be set at 12.50 percent during the entire period.

The investor at the predetermined principal payment schedule of the bonds reserve the right and option to convert 25 per cent of the face value of the bonds at a conversion strike price into the common shares of BRAC Bank Ltd. However, conversion is not mandatory.

The conversion schedules will be the 5th, 6th and 7th anniversary of bond issuance date.

Meanwhile Mercantile Bank First Mutual Fund units will debut trading on next February 8 at Dhaka Stock Exchange as per the decision of the board of directors of DSE.

The units of MBL 1st Mutual Fund will start at under 'A' category and the trading code is "MBL1STMF" while DSE company code is 12184.

MBL First Mutual Fund raised Tk one billion through initial public offering (IPO).

In the MBL First Mutual Fund, the bank subscribed units worth Tk 100 million as sponsors, while Tk 400 million has been raised through pre-IPO or private placement, and the rest Tk 500 million has been collected through IPO.

News: Daily Sun/ Bangladesh/05 Feb 2011

CB Islamic Bank Ltd yesterday introduced debit card for its clients.

Moshiul Haque Chowd-hury, managing director and CEO of the bank, formally inaugurated the service at the bank’s head office in the city, said a press release.

Md Habibullah Maznu, chief financial officer, Nafis Sarafat, head of Consumer Banking and other high officials of the bank were also present at the function.

News: Daily Sun/ Bangladesh/05 Feb 2011