The additional excise duty imposed on bank accounts in the proposed budget will discourage people to keep their money with banks, said TIB chief Monday, reports UNB.

Executive Director (ED) of Transparency International Bangladesh (TIB) Dr Iftekharuzzaman also said, "Of course, excise duty proposed in the budget will pose a negative impact...it'll discourage general depositors to deposit their money in banks," he said at a meeting at the Anti-Corruption Commission's (ACC) head office in the capital.

Replying to questions from reporters, the TIB chief said the government must rethink the proposed hike in excise duty.

‘We will treat BASIC Bank with special importance to help it meet capital shortfall’

BASIC Bank deposits declined by 14.69% between December last year and the end of March, according to the government’s financial institutions report.

On the other hand, the loans and advances situation at BASIC Bank improved by 2.27% at the end of March compared to December.

According to the Financial Institutions Division report, the BASIC Bank had a deposit of Tk1.37crore in March, Tk23 lakh less than the Tk1.58 crore it had at the end of 2016.

The total loans and advances of the bank stood at Tk1.37 crore in March, marginally bigger than Tk1.34 crore from December.

BASIC Bank’s default loans amounted to Tk7,229 cr at the end of March this year, growing from Tk6,392 cr at the end of December last year, according to the bank’s data.

In the outgoing fiscal year, the Finance Division has decided to provide BASIC Bank Tk1,000 crore from the exchequer to improve clients’ trust damaged by massive corruptions.

Funds will be supplied from the outgoing fiscal year’s revised outlay of Tk2,000 cr. Over the years, BASIC has received Tk2,390 crore from the budget under the government’s recapitalisation programme.

According to Finance Division working papers, the capital shortfall of the BASIC Bank is Tk1,934.5 crore while the capital reserve ratio was only 7.55% in 2015. An amount of Tk9,457.60 crore was disbursed from the five year budget allocations for recapitalisation.

The Finance Division observed that the default loan situation of the state-run banks has not improved during the time that they received funds from the budget to meet capital shortfalls.

It said the recapitalisation funds could only improve the banks’ balance sheet.

The observations came at a recent Finance Division meeting on capital shortfalls of seven state-owned banks with Finance Minister AMA Muhith in the chair.

The meeting said the capital shortfall of the BASIC Bank had declined by Tk706 crore in the last two fiscal years though the bank’s overall default loan situation had not improved.

Finance Ministry thinks that without recapitalisation funds, the bank will not be able to do business.

BASIC is running its Letter of Credit business with the help of Sonali Bank.

Earlier, Finance Minister AMA Muhith said: “We will treat BASIC Bank with special importance to help it meet capital shortfall.”

He said the bank needed “special nurturing” as its condition is not normal now.

“It cannot be compared with other banks.”

'It does not make much sense to keep money in the bank amid negative real interest rate'

The financial services regulator must take steps to break up a banking syndicate and prevent a disaster in the monetary system of Bangladesh, a former central bank governor warned on Monday.

Mohammad Farashuddin said the banks have formed themselves into a syndicate through which they cut deposit rates but maintain a steady interest spread, which is the profit margin – effectively the difference between the lending and deposit rates.

“Only proper banking supervision can ensure that people are not prey to a monopoly,” Farashuddin said.

According to data published on the Bangladesh Bank website, the weighted average interest rate for all banks has almost halved in the last three years, from the 8.11% on offer in April 2014 to the 4.97% available in April 2017.

And in March, the weighted average deposit rate of 5.01% coupled with the (12-month average) inflation figure of 5.39% indicated a negative real interest rate of 0.38%.

Such low or negative returns discourages depositors from putting their money in the bank out of fear that high inflation will cause them to lose money in real terms.

“It does not make much sense to keep money in the bank amid negative real interest rate,” said economist Dr AK Enamul Haque, director at Economic Research Group. “(But) people are perhaps keeping money in the bank in absence of an alternative.”

Low rates drive depositors to savings certificates

Depositors are running towards national savings certificates to enjoy a double-digit interest rate while many others delve into the stock market, said several bankers.

Total national saving certificates outstanding stands at Tk180,916cr in April, up 37% in the past 10 months of the fiscal year 2017, according to Bangladesh Bank data.

“It is very difficult to attract depositors despite offering deposit rates higher than inflation on some products,” said Shahanaz Sultana, senior principal officer at AB Bank.

Analysts suggest an equilibrium level of deposit rates within the economy will help address the issue and protect all depositors.

'The new note will be released through the central bank, marking the upcoming Eid ul-Fitr,'

The government is going to issue a new currency note denominating Tk5 signed by the Finance Ministry’s senior Secretary Hedayetullah Al Mamoon.

The currency note will be distributed through the central bank today while it will be available in other branches of Bangladesh Bank later, according to the ministry sources.

“The new note will be released through the central bank, marking the upcoming Eid ul-Fitr,” said the secretary. “There are some changes to the new note compared to the existing one.”

According to sources, the image of national monument and portrait of the Father of Nation Bangabandhu Sheikh Mujibur Rahman are stamped on the front side of the new note while image of Kusumba mosque of Naogaon is on the back.

However, the colour, size, watershed, design and other security features of the new note are similar to the previous one.

Though the existing note and coin denominating Tk5 were issued by the central bank, the new currency note has been issued by the government.

Mosharraf Hossain Chowdhury, Chairman, Board of Audit Committee of Shahjalal Islami Bank Limited, presiding over the 194th meeting at the bank\'s head office in the city on Monday. Farman R Chowdhury, Managing Director, Abdul Halim, Mohammed Golam Quddus