Bangladesh Bank has decided to give non-bank financial institutions a breathing time to raise their paid-up capital to Tk 100 crore.

A total of nine NBFIs have failed to raise their capital by the December 31 deadline.

“We'll give those (NBFIs) some time. We've also asked Bangladesh Securities and Exchange Commission to expedite the right share offers of some of these NBFIs,” SK Sur Chowdhury, deputy governor of the BB, told The Daily Star.

But Chowdhury did not disclose how much time the NBFIs would get to raise their paid-up capital.

Some of the NBFIs had plans to raise their capital by offering rights shares but Bangladesh Securities and Exchange Commission earlier blocked the scope for the companies with negative earnings.

Bangladesh Leasing and Finance Companies' Association.

Khan, also the managing director of Prime Finance, said he would sit with the association members soon to discuss the issue.

The association also had a meeting with the central bank recently, he added.

The central bank last year asked the NBFIs to raise their paid-up capital to minimum Tk 100 crore by June 30 this year. Later, the deadline was extended to December 31.

Despite the time extension, nine NBFIs have failed to meet their capital requirements.

Of these companies, Phoenix and Bangladesh Industrial Finance Company (BIFC) have applications pending with the stockmarket regulator for nearly one year to raise their capital by issuing rights shares.

Another company, Industrial and Infrastructure Development Finance Company (IIDFC), said it has taken all the preparations to meet the deadline.

GSP Finance was not allowed to increase its capital through rights offer as the company is yet to pass one year since its listing on the stockmarket. Hajj Finance has been a losing concern until this year.

However, some of these companies told The Daily Star that they were in the process to meet the BB's capital requirement, but they would require more time to do so.

Inamur Rahman, managing director of BIFC, said they are in the process and informed the central bank about their roadmap to raise the capital.

“Everything is ready. We've audited out accounts and done credit rating. Now we'll go for permission from the stockmarket regulator,” said Rahman. “We need a few more months.” IIDFC is well ahead to meet the capital requirement.

“Presently, we've Tk 77 crore in paid-up capital. We'll inject Tk 22 crore from our retained earnings and the rest Tk 1 crore from the sponsors,” said Asaduzzaman Khan, managing director of IIDFC.

Khan said they have applied to the stockmarket regulator and will be able to meet the deadline.

A senior official of the stockmarket regulator, asking not to be named, said they would not allow any company having negative earnings to raise its capital through the offer of rights shares.

There are 31 NBFIs operating in the country. Of them, 22 are listed on the stockmarket.

The industry players said most of the 31 companies incurred losses in 2012 due to a rise in cost of funds and sluggish investment demands, coupled with competition from banks. As of 2011, the NBFIs have net investments of around Tk 20,000 crore with a net asset value of Tk 5,000 crore.

Md. Abul Kashem, Deputy Governor of Bangladesh Bank, inaugurates Islami Bank m-Cash service at a function at a hotel in Dhaka.

Islami Bank Bangladesh Ltd (IBBL) Thursday launched mobile banking service for its clients.

Bangladesh Banks Deputy Governor Md. Abul Kashem formally inaugurated the service titled Islami Bank m-Cash at a city hotel. With Managing Director of IBBL, Mohammad Abdul Mannan in the chair, the function was also attended by Bangladesh Banks  Executive Director Das Gupta Asim Kumar, IBBL Executive Committee Chairman Engr. Eskandar Ali Khan and Chief Financial Officer of Robi Axiata Ltd Mahtabuddin Ahmed.

While addressing, the central banks deputy governor urged the mobile banking operating institutions to strictly follow the central banks guidelines in this regard.

M-banking is a good system and protects the people from fake notes and other hassles related to traditional cash transactions, Md Abul Kashem added.

He further said as 60 percent of the countrys population use mobile phones, the expansion of M-banking will play an effective role bringing more people under banking service easily. He mentioned that over 50 million people are still out of banking service.

The central bank says GDP growth will be around 6.2pc this fiscal year

The economy is likely to grow at a similar pace as experienced over the last ten years -- of around 6.2 percent -- in fiscal 2012-13, despite the continued global economic slowdown, Bangladesh Bank said yesterday.

“Most indicators in the first quarter of fiscal 2012-13 point to a more moderate level of economic expansion,” the BB said in its latest quarterly review.

The BB projection means that the growth is likely to fall short of the government's original target of 7.2 percent GDP growth for the current fiscal year.

"Bangladesh Bank will produce forecasts for economic growth on a regular basis, in line with the common practice in other central banks across the world,” said Hassan Zaman, its chief economist.
“We used recent data on economic activity and did forward-looking projections for the main sub-sectors of the economy,” he said.

Remittances grew by 19.7 percent in the July-September period of the current fiscal year, when in the same period last year it grew by 11.8 percent and by 10.2 percent on average in fiscal 2011-12.
“The significant remittance growth is likely to have positive consequences for both domestic consumption and investment.”

Private sector credit grew by 19.9 percent in the first quarter of FY13, on par with FY12's average of 19.9 percent.

While the annual development programme (ADP) utilisation of 12 percent in the first quarter this year is only slightly higher than the 11 percent recorded for the same quarter a year ago.
Export growth stood at 2.07 percent, down from last fiscal year's average of 6.2 percent and will continue to be so, mainly in light of the Eurozone crisis.

Meanwhile, imports grew by 2 percent, down from the 5.2 percent registered on average for the whole of FY12.

Given the “mixed picture” by the major factors associated with growth, the BB projected the economy to grow between 6.1 percent and 6.4 percent in the current fiscal year.
“This compares favourably with a developing country average forecast of 5.3 percent (World Bank 2012) for 2012.”

CPI inflation fell to 7.4 percent in the first quarter this year from 12 percent in the same quarter last year, with average inflation coming down to 9.69 percent in September 2012.
The decline in inflation was due to a slowdown in food inflation and the impact of monetary policy on non-food inflation and inflationary expectations.

“We expect the average inflation to decline further in FY13,” said the BB, adding that the prediction was made assuming no supply-side shock and the continued coordination between the monetary and fiscal policies.

“The first quarter witnessed three key developments related to monetary policy,” said the BB report.
The sharp increase in foreign remittances during the quarter (19.7 percent) and higher foreign aid disbursements contributed to a sharp rise in net foreign assets (27 percent over the quarter).
While this favoured a reserve build-up close to four months of import cover, it also led to some over-shooting of monetary targets.

The second key development relates to the sharp decline in inter-bank rates, which fell from 15 percent in June 2012 to 9.81 percent by the end of September, and from a peak of 19.66 percent in January 2012.
“This confirms the ample liquidity prevailing in the banking system and as such, the BB is seeking to sterilise some of this liquidity to avoid a re-emergence of inflationary pressures.”

The third development centres around the healthy growth in private sector credit, which during the first quarter this year grew by 19.9 percent against a target of 18.4 percent. This suggests that the credit envelope will “not be a constraint towards achieving the overall economic growth targets”.

The National Board of Revenue's tax collections were 12.8 percent higher than raised in the first quarter and 18.6 percent of the budgeted amount for the whole of FY13.

Higher revenue inflows from direct taxes (22.7 percent increase) and value-added tax (15.7 percent increase) accounted mainly for the positive first quarter performance. “On the whole, public finance's tax collections appear to be broadly on track.”

Meanwhile, the total government expenditure in the first quarter increased by 24.6 percent compared to the same period last year. Within these outlays, ADP expenditures rose by 32 percent.

In the external sector, the current account balance turned into a surplus of $140 million during the quarter against a deficit of $10 million in the same period a year ago.

Remittance inflows increased by a 'remarkable' 19.7 percent to $3.56 billion during the period compared to $2.97 billion during the same period last year and more than covered the trade deficit of $2 billion and the deficit in other current services.

This surplus combined with a surplus in the capital account contributed to an overall balance of payment surplus of $1.1 billion in the quarter against a deficit of $100 million in the same quarter last year.
As a result, gross foreign international reserves rose to $11.25 billion at the end of the first quarter this year compared with $9.88 billion in the same period last year.

The foreign exchange market remained mostly stable during this period with the taka appreciating by 0.21 percent against the US dollar during the quarter.

Gross domestic agricultural production is expected to be 2.2 percent higher than that of the previous year, of 65.6 million tonnes, on the back of government incentives and higher agricultural credit disbursement.
“We also assume that the effective fertiliser supply and better seed distribution seen in recent years will continue, and contribute to achieving an agricultural growth rate of between 3.50 percent and 3.75 percent in fiscal 2012-13.”

The industrial sector is projected to grow between 7.5 percent and 7.75 percent in fiscal 2012-13, down from the 9.47 percent seen last fiscal year, but in line with the average industry sector growth rate over the last ten years.

Bangladesh Bank (BB) eased the criteria for loan classification and provisioning in a view to help spur economic growth through a faster process of financial inclusion.

 
The loan classification and provisioning criteria has been amended "with a view to expediting the economic growth triggered by the comparatively small scale borrowers and promoting financial inclusion",

the central bank said in a circular issued yesterday.

Under the amended loan classification and provisioning, loans excepting short-term agricultural and micro-credit in the "Special Mention Account" and "Sub-Standard" will not be treated as defaulted loan. However, Fixed Term Loans amounting up to Taka one million in the "Sub-Standard" category will also be treated as default loan.

Earlier in September, the BB stipulated that the Short-term Agricultural and Micro-Credit if not repaid within the fixed expiry date for repayment will be considered past due/overdue after six months of the expiry date.
In the latest circular,

the BB said in case of any installment or part of installment of a Fixed Term Loan amounting up to Taka one million is not repaid within the due date, the amount of unpaid installment will be termed as "past due or over due installment".

In case of such types of Fixed Term Loans, if the amount of past due installment is equal to or more than the amount of installment due within six months,

the entire loan will be classified as "Sub-standard". If the amount of past due installment is equal to or more than the amount of installment due within nine months, the entire loan will be classified as "Doubtful".

If the amount of past due installment is equal to or more than the amount of installment due within 12 months, the entire loan will be classified as "Bad/Loss".

In case of any installment or part of installment of a Fixed Term Loan amounting more than Taka one million is not repaid within the due date, the amount of unpaid installment will be termed as 'past due or over due installment'.

The entire loan will be classified as "Sub-standard" if the amount of past due installment is equal to or more than the amount of installment due within three months and the entire loan will be classified as "Doubtful" when the amount of past due installment is equal to or more than the amount of installment due within six months. 

As liquidity crisis appears, the scam hit Sonali Bank has begun to depend largely on the inter-bank call money market to maintain its daily banking activities, officials said.

Sonali, the country's largest state-owned commercial bank, is facing huge financial crisis due to the recent loan scandals.

 
In one of the scam, Hall-Mark Group and five other companies in connivance with several bank officials and executives embezzled nearly Tk 3,600 crore (funded and non-funded) from the bank's Hotel Ruposhi Bangla Branch, creating immense liquidity pressure on the bank.

Earlier, it shelved many business decisions and disbursement of fresh loans to its clients due to fund crunch.
Available data shows that the bank has borrowed Tk 825 crore from the money market in past few days in order to ease the bank's liquidity crisis. 

  
The bank borrowed Tk 350 crore on December 18, Tk 275 crore on December 26 and Tk 200 crore on December 27 (Thursday).  
"The bank hit by scams is under duress to borrow funds from the money market," said a senior Sonali Bank official told The New Nation yesterday.

He added that the banks financial condition had become weak and as much, it had to borrow funds to deal with the daily transactions.  
"The heavy borrowing by the public entities also created immense liquidity pressure on Sonali Bank's treasury," the official further added.

The official noted that borrowings by the state-owned enterprises (SOEs) from Sonali Bank kept on mounting and for some instances their loans moved up to 50 per cent year-on-year.

   
He, however, said that borrowing funds from the call money market is a normal practice for the banks and financial institutions in which they have to borrow and lend money from the market in any crisis moment.

 
According to Bangladesh Bank (BB) data, Tk 44,185.50 crore was traded in the inter-bank call money market between December 18 and 27 at 11 to 14 per cent interest rates.

BB officials said the inter-bank call money market witnessed some volatility over the last few days with rising liquidity pressure from the banks and financial institutions.

The weighted average rate (WAR) call money, however, reached 10.33 per cent during the period.