The PalliSanchay Bank, ‍a proposed bank to encourage rural savings, will start operation in the first week of July as the current parliament session is expected to pass a related bill.

A temporary head office of the bank will be set up at Bangladesh Rural Development Board office in the capital’s Karwan Bazar area, with branches across 19 districts of the country.

“The specialised bank is going to begin operation in the first week of this July,” MA QuaderSarker, secretary of Rural Development and Cooperatives Division, told the Dhaka Tribune yesterday.

He said the division had already sought land from the government to establish a head office in Dhaka.

According to the PalliSanchay Bank Bill, the bank derives from the government’s “One House, One Farm” project. Last week State Minister for Finance MA Mannan saidthe bill would be placed and passed in the current session.

On November 11 last year, the cabinet approved the draft law for the rural savers’ bank after the law ministry’s vetting.

The “One House, One Farm” is a project under the Annual Development Programme (ADP), the first phase of which started in 1997 during Awami League (AL) government. The second phase of the project started after the AL-led grand alliance government came to power in 2009.

The government will hold 51% of the bank’s ownership and the remaining 49% would go to the 17,300 member cooperative societies of the “One House, One Farm” project.

However, the government will not take any dividends against its shares.

As per the draft law, the bank’s authorised capital would be Tk1,000crore while paid-up capital Tk200 crore. The cooperative societies’ total fund of Tk1,342crore will be transferred to the new bank.

PalliSanchay Bank will not be governed under the Banking Companies Act 1991, meaning it would remain mostly out of control of the central bank. But like Grameen Bank, it will have to submit reports as per Bangladesh Bank’s demands, and its audited reports will be presented via gazette notification and placed in the parliament.

The bank’s board of directors will consist of 15 members and the secretary of the Rural Development and Cooperatives Division will be its ex-officio chairman.

News:Dhaka Tribune/11-Feb-2014

The interest payment on government borrowing grew by 30% in the first four months of the current fiscal year as compared to the same period previous fiscal year, prompting the authorities to go for a mid-term debt strategy.

Officials are expecting the strategy to significantly ease the rising payments on debt servicing that soared well above the usual level of 18% annually.

“The government is considering steps to rationalise domestic borrowings and minimise the interest payments,” said a member of debt management committee of the finance ministry.

“We’ve already prepared a medium-term strategy and it will be sent to the ministry for approval soon.”

A move has already been taken to mobilise funds through issuing medium term bills and bonds in accordance with the strategy, said the official.

Domestic sources of borrowings – particularly the banking system – usually increase the cost of borrowing, leading to a rise in the payment of interest, analysts said.

The spending would exceed the government’s target in the current fiscal year 2013-14 unless the rising trend is addressed. It might force the government to borrow from the commercial banks to meet the budget deficit, they said.

In the current budget, the government’s target for domestic interest payment on debt is Tk26,000 crore.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the interest payment was rising mainly due to the government’s increased borrowings from domestic sources.

“Domestic borrowings involve at least double-digit interest rates while foreign financing costs single-digit interest rates. The interest payment on foreign financing grew negatively by over 4%.”

According to the finance ministry, the government paid only Tk590 crore in July-October period of the current fiscal year against Tk615 crore in the corresponding period of the previous fiscal in interest on foreign financing.

Mansur said the government needed to focus on the external financing as any increased borrowing from the local banking sector might cause a crowding-out effect on the economy.

According to the finance ministry, the government’s expenditure on interest payment on debt in the FY2012-13 stood at Tk24,000 crore, nearly 18% up from the previous fiscal.

Of the amount, Tk22,500 crore was paid in interest on domestic borrowings and Tk1,492 crore on foreign financing.

In first half of this fiscal, the government made a net repayment to Tk6,700 crore while borrowing Tk11,300 crore from scheduled banks, according to Bangladesh Bank.

News:Dhaka Tribune/11-Feb-2014

Financing the proposed Padma Bridge project from own resources would put pressure on Bangladesh Bank, limiting its capacity to serve local business at the time of releasing fund from the country’s foreign exchange reserve.

Finance Minister AMA Muhith dropped the broader hint in response to an appeal from Bangladesh Textile Mills Association (BTMA) at a meeting at the ministry yesterday.

BTMA urged him of taking steps so they get financial assistance from the central bank’s forex reserve for importing capital machinery for their factories.

Bangladesh Bank provides private sector with foreign exchange loan from its reserve, which at present, hovers around US$18bn – equivalent to around six months of import payments.

“The bank (Bangladesh Bank) will not be able to help the businessmen at that time,” Muhith told the BTMA delegation, led by its president Jahangir Alamin.

He said the government has already decided to take funds from the reserves during issuance of the work order for the bridge as it trying to mobilise funds from different sources. The central bank would maintain its strong forex reserve to support the project.

While announcing the Monetary Policy Statement for the second half of the current fiscal year late last month, Bangladesh Bank Governor Atiur Rahman had told that the central bank would build foreign exchange reserve to finance the Padma Bridge project – one of the six fast-track projects of the new government.

The World Bank and other development partners had suspended their financing decision of US$1.2bn for the US$2.9bn project on corruption allegation, before the government expressed its unwillingness to take the loan.

In response to another request, the minister said it would take time to solve the gas crisis the industries in Chittagong are facing.

The BTMA delegation also urged the minister to solve the hassles associated with releasing 5% cash incentive for the affected spinning mills. They pointed out that the government had declared special facility on September 20 in 2011 for the spinning mills that had been affected by purchasing cotton at very high prices.

But to receive the cash incentive, the spinning mills were required to submit copies of the Export Performance form and shipping bills. They argued that it was not possible for the spinning mills to submit those documents because the spinning mills were not directly involved with exports.

They were indirectly involved with the process through the export-oriented fabrics and ready-made garment manufacturers. They sought waiver of the tax at source on local letter of credit (LCs) and back-to-back LCs.

The BTMA leaders said the tax charged during payment of prices of cotton bought through local LCs was leaving a negative effect on the total export of fabrics. Thus it was raising the prices of cotton as well as yarn.

BTMA leader also sought waiver of the tax at source on raw materials bought through back-to-back LCs for manufacturing export-oriented products.

News:Dhaka Tribune/15-Feb-2014

 As part of green financing, BRAC Bank will provide composite working capital facility of Tk 780 million to Envoy Textiles for implementing ETP expansion project of the company.

The financing facility includes offshore financing of $3.5 million.

BRAC Bank Limited and Envoy Textiles Limited signed banking financing agreement at a function at the head office of Envoy Textiles in Dhaka recently.

Syed Mahbubur Rahman, Managing Director and CEO of BRAC Bank, and Kutubuddin Ahmed, Chairman of Envoy

Group, signed the agreement on behalf of

the respective organizations.

Mohammad Mamdudur Rashid, Deputy Managing Director, Mahmoodun Nabi Chowdhury, Head of Corporate Banking Division, BRAC Bank, along with other senior officials from both the organizations were present at the ceremony.

In line with green banking guideline of the Bangladesh Bank, BRAC Bank finances in ETP, biogas, renewable energy including solar power, bank sources said.

News:Daily Sun/15-Feb-2014

A two-day long orientation programme organised for Management Trainees of Prime Bank Limited was held at Spectra Convention Center in Dhaka recently.

Md. Ehsan Khasru, Managing Director and CEO of the bank attended the function as chief guest, said a press release.

News:Daily Sun/15-Feb-2014