Bangladesh Bank plans to lend low-cost loans from its ‘Export Development Fund’ to big exporting industries, bringing changes in the current regulations governing the fund that is only used to boost non-traditional export items.
Any industries selling their goods abroad, besides readymade garment, leather or food, will be eligible for the fund to be charged two per cent interest, a senior BB official said.
The facility will be made available under a proposed ‘financial sector support project’ to be financed jointly by the World Bank and the government, he added.
The BB senior officials recently held a series of meetings with a World Bank team on the project, largely to be aligned to cater to the needs of large and medium size export-oriented industries as the sector faces shortage of running capital due to high interest-bearing local funds and dwindling export orders from the buyers.
‘The WB has assured us of providing loan to back large export-oriented industries and salvage a good number of medium size entrepreneurs having huge debt of local banks and image crisis in western markets after the deadly industrial disaster of Rana Plaza,’ an executive director of BB told New Age.
The fund to be committed by the Washington-based international lender under the proposed project could be between US$ 500 million and US$ 1 billion in the first phase, he added.
The BB officials concerned said the EDF that finances only non-traditional export sector at a rate of LIBOR plus 1.5 per cent and disburses US$ 5 million at the highest against a single exporter will see an upward revision in the ceiling under the proposed project.
The fund from the invigorated EDF could be used to import capital machineries, technology upgradation and safety improvements of factories along with meeting import costs for raw materials for export-oriented goods, sources said.
Under the proposed project, loans for constructing warehouses and cold storages for selected agricultural commodities will be provided to aspirant entrepreneurs as such investment would help farmers to store their produces.
The BB officials said the loan amount from the WB and its terms are being negotiated with finance ministry officials.
Asked, the finance officials admitted and justified the project’s usefulness.
The finance officials said the finalisation of the project could take a couple of months as the Economic Relations Division under the finance ministry is now pursuing the issue with the WB’s local office.
Banking
AB Bank celebrates 32nd founding anniversary
AB Bank Limited observed its 32nd founding anniversary recently. All the 89 branches of the bank observed the day in a befitting manner, said a press release.
To mark the occasion the bank organised, a friendly cricket match at BKSP field at Savar. M. Wahidul Haque, Chairman of the bank accompanied by the Directors of the bank attended the programme.
Shamim Ahmed Chaudhury, President and Managing Director of the bank greeted all present on the occasion.
Chairman of the bank expressed his gratitude to all shareholders, clients, well wishers and regulators for their continued support and trust in AB Bank. He also thanked the bank’s employees for their dedicated services. AB Bank operates 89 online branches including an Islamic Banking branch and one branch in Mumbai, India, 11 SME centers, two independent subsidiaries AB Investment Limited and AB Securities Limited and a wholly owned Subsidiary (ABFIL) in Hong Kong.
Lending rate still high, deposit rate comes down
The central bank had earlier made pressure on local banks to cut their lending rates, but went in vain
The banks are still charging high interest on credit, although most of them have reduced the deposit rates, ending the rat race for accumulating funds.
Lending rate of all the commercial banks still remained high despite awash with excess liquidity, lack of credit demand and increase in foreign loan inflow since last one year ahead of national election, bankers said.
They said the central bank had earlier undertaken a move to encourage foreign loan inflow in order to make pressure on local banks to cut their lending rates, but went in vain.
The average lending rate of all commercial banks increased slightly to 13.4% in February from 13.39% in January while average interest rate on deposits decreased to 8.34% from 8.40% during the same period of last year, according to the Bangladesh Bank data.
The interest rate spread between the lending and deposit rates crossed again the desired level of 5% in February only after a month it stayed below the level.
The gap between average lending and deposit rates of 19 local commercial banks went up to 5% in February from 4.99% in previous month due to increase in the lending rates, said a senior executive of the central bank.
Foreign loan inflow increased significantly in the last two years as big entrepreneurs were keen to take foreign loans below 5% interest rate against the local lending rate of up to 13.50%.
Bangladesh Bank approved a total of US$1.18b in 2013 and $1.49b in 2012 where only $819m foreign loans were entered into Bangladesh in 2011.
The excess liquidity in the banking sector has increased by Tk29,000 crore or 48% to stand at Tk89,000 crore in January 2014 from Tk60,000 crore in the same month last year.
It resulted in an average interest rate in the call money market of around 7.78% during the last year as compared to an average of above 12% in the previous year.
Excess liquidity piled up in the banking sector during the last one year due to the sluggish investment and lack of credit demand amid political unrest. As a result, all the commercial banks had lost their profits in 2013, said a senior executive of a private bank.
He said: “Banks were supposed to cut their lending rate in December, 2013, to reduce the spread. Though some banks have reduced their lending rates, most of the banks could not comply with the obligation due to their own increased maintenance expenses.”
All the banks could not take enough return from their deposit funds due to sluggish credit disbursement, but they had to pay interest rate against the deposit that they already committed. As a result, interest expense increased than income. Under the circumstance, the banks are not able to cut their lending rates, he said.
“But to compete with the international banks, ultimately all the commercial banks have to reduce lending rates as already big borrowers have started taking loans from the foreign loan market at lower rates.”
The foreign companies engaged in manufacturing or services output activities for three years or longer in Bangladesh can have access to term loan in Taka term from the domestic market subject to all applicable credit norms.
News:Dhaka Tribune/13-Apr-2014
BB eyes new project to back large, traditional export industries
BKB distributes Tk 4509cr loan
Bangladesh Krishi Bank (BKB) has disbursed Tk 4509 crore as rural and agriculture loans to boost up agriculture production during nine months (July 2013 to March 2014) of the fiscal 2013-2014.
The amount was Tk 607 crore higher than that released during the same period of last fiscal (2012-13), said a press release.
To be self-reliant in food production, the bank disbursed loans in crops, fisheries, livestock, poverty alleviation and agro-based industries to Tk 4247 crore, which is Tk 931 crore more than that of last year.
Prime Bank signs MoU with Bangkok Hospital
Prime Bank Limited signed a Memorandum of Understanding (MoU) with Bangkok Hospital and My Health at the bank’s head office in Dhaka recently.
Managing Director and CEO of Prime Bank Md Ehsan Khasru and Managing Director of My Health Dr. Nilanjon Sen signed the MoU on behalf of their respective organisations.
Head of Headline Business of the bank Shahidur Rahman Khan, Head of Card Division SVP AH Majumder, Head of Marketing VP Imtiaz Ahmed Siddiqui and Head of Premium Banking SAVP Sharmin Ahmed along with other high officials of both the organisations were present.
Under the agreement, the premium customers of Prime Bank, Platinum Cardholders and staff members of the bank along their families will avail numerous services of Bangkok Hospital.