Bangladesh Bank has relaxed the guidelines for writing off small bad loans as it considered the litigation cost is sometimes higher than the amount of a loan.

It allowed the scheduled banks to write-off classified loans below Tk50,000 without filing any case.

The banks will, however, have to comply with other guidelines while writing off the loans, said a circular issued on Thursday.

Earlier, the banks had to write off any bad loan through filing case and keeping 100% provision.

The banks go for writing off a loan when it considers there is no hope to get the money back.

The scheduled banks are allowed to write off loans, having been adversely classified for more than 5 years, by maintaining a 100% provision.

The banks have written off a total classified loan of Tk242bn till 2012. 

News:Dhaka Tribune/08-Nov-2013

It seems that the row within government over the proposed Palli Sanchay Bank, a bank to encourage rural savings, has finally seen an end.

Bangladesh Bank and Finance Division who have been opposing the proposal from the very outset have retreated.

“We have given consent to the bank. It will be placed at the next cabinet meeting for approval in principle,” said Finance Minister AMA Muhith on Thursday.

Emerging from a meeting on the proposed bank in Dhaka on Thursday, the minister told it to the reporters on Thursday. State Minister for LGRD Jahangir Kabir Nanok, the LGRD Secretary, Banking Division Secretary Dr Aslam Islam and Bangladesh Bank Governor Dr Atiur Rahman also attended the meeting held at the finance ministry office.

AMA Muhith said the draft Palli Sanchay Bank Act 2013 will be presented in the next session of the parliament.

The ministry realised that such bank would make rural people interested in saving money and attract investment opportunities in the rural areas.

He said they first opposed the idea of Palli Sanchay Bank as the proposal for establishing a commercial bank.

As the government is at the last stage of its tenure, it might not be able to finalise the proposal before leaving office, said the

minister. “There is no political motive against the setting up of the specialised bank. Proposal was also not made hurriedly.”

The finance minister said the concept of the Palli Sanchay Bank comes from the Grameen Bank. “But this is not to destroy Grameen Bank.”

“If someone says that it (Palli Sanchay Bank) is a conspiracy against the Grameen Bank, it’s just rubbish.”

Earlier on July 30, Prime Minister Sheikh Hasina gave her direction to establish a new specialised bank named Palli Sanchay Bank to avoid the misuse of deposits made by poor rural people.

The ministry of finance took the decision to establish the specialised bank on the same day it decided to prepare a draft of the Palli Sanchay Bank Act 2013 in a meeting on August 1.

According to a press release, the number of beneficiaries of “One House One Farm” project now stand at over Tk1m while their deposits exceeded Tk1bn.

Ekti Bari Ekti Khamar (One House One Farm) was launched by the Rural Development and Cooperative Division under the LGRD ministry with a target of positively changing the lives of rural people. 

News:Dhaka Tribune/08-Nov-2013

The extent of default loans increased in the third quarter due to tightening the loan classification guideline, sluggish business activities during the political uncertainty and interruption in energy supplies.

The classified loans increased by Tk44bn or 8% to Tk567bn in the July-September quarter from Tk523bn of the April-June quarter of this year, according to Bangladesh Bank data. The classified loan is about 13% of the total outstanding loan of more than Tk4tn.

The total classified loan was Tk510bn in March this year, which was Tk290bn in June, 2012.

“The classified loans increased due to tightening the guideline,” said a senior executive of Bangladesh Bank. Besides, sluggish business during the political uncertainty and lack of gas and electricity pushed the classified loans up, he said.

Bangladesh Bank Deputy Governor SK Sur Chowdhury said the commercial banks have classified the loans from March quarter following the international standard guideline issued by Bangladesh Bank.

He, however, said the banks have faced some problems to follow the new guideline. “They will overcome the problems gradually.”

According to the new guideline, banks have to classify the loans in three categories, included sub-standard, doubtful and bad or loss.

Of the total classified loans, four state-owned banks have Tk241bn, private commercial banks Tk223bn, specialised banks Tk87bn and foreign banks Tk14bn.

Of the state-owned banks, Agrani Bank’s classified loan stood at Tk51bn, which is 27% of the total outstanding loan; Janata Bank Tk47bn, which is 18% of outstanding loan; Rupali Bank Tk16bn, which is 17% of their outstanding loan; and Sonali Bank Tk125bn, which is 42% of their total outstanding loan.

Under the revised loan classification guideline, the general provision against all unclassified loans of small and medium enterprises (SME) has been set at 0.25% from the existing 1%.

Besides, the base for provisioning has been re-fixed at minimum 15% of the outstanding balance of a loan from 20%.

Under the revised provisions, the down-payment for the first time rescheduling of a term loan has been reduced to minimum 15% from at least 25% previously of the overdue installments or 10% of the total outstanding amount of a loan, whichever is lower.

The application for second time loan rescheduling will be considered upon receipt of cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of a loan, whichever is lower.

The application for third time loan rescheduling will be considered upon receiving cash payment of minimum 50% of the overdue installments or 30% of the total outstanding amount of the loan, whichever is lower. 

News:Dhaka Tribune/08-Nov-2013

 Financial Inclusion is a built-in concept of Islamic Finance and Bangladesh has become a role model of financial inclusion for the Islamic financial world.
Mohammad Abdul Mannan, managing director of Islami Bank Bangladesh Limited, said this while addressing the first ever ADB conference on Islamic Finance for Asia held at ADB Headquarters in Manila, Philippines recently. Organised jointly by Asian Development Bank (ADB) and Islamic Financial Services Board (IFSB), the conference was attended among others by Takehiko Nakao, president of ADB, Jashim Ahmed, secretary general of IFSB, Rajat M Nag, managing director general of ADB, Bruce Davis and Stephen P Groff, vice-presidents of ADB,  Dr Ishrat husain, ex-chairman of IFSB and ex-governor of State Bank of Pakistan, Zamir Iqbal, lead investment officer of World Bank, Dr Mulya Siregar, assistant governor, Bank Indonesia and a host of experts, practitioners and regulators from ADB member countries and from the Islamic finance world, says a press release.
The conference aimed at creating greater awareness on the potentials and opportunities brought about by Islamic finance to this region and discussed the issues relating to its progress, challenges and further developments.
The conference also aimed at exploring avenues for interaction and co-operation among the members of IFSB and ADB.
Mohammad Abdul Mannan, in his presentation on “Islamic Banking: Financial Inclusion as a Core Concept: Bangladesh Experience” elaborated on the basics of Islamic Finance and Banking and shared with the audience the experience of financial inclusion in Bangladesh which is termed as the university of microfinance.
He also placed the integrated financial inclusion model of Islami Bank Bangladesh Limited based on its Rural and Urban Poor Development Schemes as a successful model that has a share of more than 50 per cent of the world Islamic microfinance, which attracted high attention of the participants in the conference.

News:The Independent/08-Nov-2013

 State-owned Sonali Bank has taken an initiative to help other local banks to run their banking business in the United Kingdom, particularly the remittance service to non-resident Bangladeshis (NRBs).

Ten Bangladeshi banks were in trouble to run various businesses including remittance services after the British bank Barclays in July this year shut their accounts on ground that the banks do not match its new eligibility criteria.

“Like the Barclays, the UK branch of Sonali Bank will facilitate service to the exchange houses of different Bangladeshi banks there so they can provide their clients the services they used to deliver earlier,” Sonali Bank Managing Director and Chief Executive Officer Pradip Kumar Dutta told BSS on Thursday.

He said the exchange house of Pubali Bank already signed a consent letter with Sonali Bank for getting the services. Dutta expects that the exchange houses of other banks would also follow the suit soon because such partnership with Sonali Bank would help them provide their clients with smooth remittance services.

News: Daily Sun/08-Nov-2013