Jaspal Singh Bindra, Chief Executive Officer of Standard Chartered for Asia arrived in Dhaka on an official visit to Bangladesh.

During the visit, Jaspal Bindra will review Standard Chartered’s business and strategies in Bangladesh. He will meet government high-ups and interact with staffs and client of the bank, said a press release.

Jaspal Singh Bindra joined Standard Chartered Bank in 1998 and was appointed as director of Standard Chartered Bank in August 2007. In addition, he is also a member of the Group Management Committee.

News: Daily Sun/Bangladesh/16-Sep-12

Rejaul Karim Byron

---

A number of banks on several occasions had accepted foreign and local bills against letters of credit, but did not pay the dues of other banks in time. The amount of such unpaid bills stood at $363 million or Tk 2,976 crore as of June 30.

And a portion of this amount remained unpaid due to complaints of false documentation and faulty accepted bills against local and foreign LCs.

Dishonest businesses provide these false documents to banks to siphon money from the banks without any real transaction.

The central bank got the scenario on the basis of information collected from the banks.

The Bangladesh Bank has directed the commercial banks to pay their overdue accepted bills against local and foreign LCs within 15 days.

The directive was given to all banks, except Sonali Bank, at a meeting chaired by BB Governor Atiur Rahman yesterday.

The meeting discussed the interest rate, classified loans and the banks' reluctance to pay the accepted bills.

About 40 banks' unpaid amount against accepted bills stood at around $363 million in 7,260 accepted bills, as of June 30, 2012.

Of the amount, $319 million was against 6,746 local bills and $43 million against 514 foreign bills.

After the meeting, BB Deputy Governor SK Sur Chowdhury told journalists that the banks were asked to pay the unpaid bills within 15 days.

If any bank fails to do so, the creditor will go to Bangladesh Foreign Exchange Dealers' Association (Bafeda) for a settlement, and the association will take steps in line with its rules.

Chowdhury also said, if Bafeda fails to settle it, the central bank will deduct the money from the account of the debtor bank and will deposit the amount in the account of the creditor bank.

The meeting decided that the banks who have accepted such bills will have to pay the money to the creditor banks now.

BB officials told the meeting that different banks complained of non-payment of such bills.

The recent Hall-Mark scam was detected by looking into such complaints, the officials said at the meeting.

On different occasions earlier, banks, despite accepting foreign and local bills against LCs, did not pay the dues of other banks on time.

After complaints from several banks, the central bank deducted money from the debtor bank and paid the amount to the creditor bank.

The amount of such overdue bills has been on the rise in recent times, the BB officials said.

According to central bank statistics, on June 30, 2009 the number of such unpaid bills was 2,789, and against the bills the amount was $88 million.

The number of bills stood at 8,557 in March and the overdue amount was $944 million.

In the last few months this type of overdue amount was brought down to one third, said a BB official.

The central bank told the meeting that serious irregularities are taking place in the banking sector through inland bill purchase (IBP), and acceptance in local and foreign bills against LCs.

To detect the irregularities, the BB has formed 40 teams and they are investigating the complaints. If any irregularity is detected, action will be taken against the concerned bank, the official said.

News: The Daily Star/Bangladesh/15-Sep-12

Tawfique Ali

The controversial Hall-Mark Group now claims an abnormally inflated price for the 47 acres of land it has mortgaged to Sonali Bank for the Tk 2,686-crore loan it has taken using forged papers.

Through public advertisements over the last few days, the company has been claiming the market price of the land is Tk 2,000 crore, which is nearly four times the official estimate.

Sonali Bank in its primary evaluation put the price at Tk 500-600 crore, a bank official told The Daily Star.

According to another estimate by National Bank, the land is worth Tk 425 crore. (National Bank is not a party to the loan scam. The bank has done a mortgage valuation for a piece of land owned by one of its clients on the same site. The estimate is cited for the readers to see the contrast between the market price and Hall-Mark's claim.)

Hall-Mark's mortgaged land is at Janata Housing at Hemayetpur and Tentuljhora of Savar, said group General Manager Tushar Ahmed.

The housing project was taken up in 1978, but most of the area remains vacant in the absence of basic civic amenities and utility services.

In the city master plan the entire site is shown as wetland and rural homestead. But violating the environment law, Hall-Mark has initiated an industrial park there allegedly occupying many times more land than it owns.

Complaints of illegal occupation and vandalism against Hall-Mark piled up in the local police station, but little action followed.

Locals accuse the police and the local administration of being silent about such "land grabbing" by Hall-Mark Managing Director Tanvir Mahmud.

Some say police have some kind of "sympathy" for Tanvir.

In July last year, a group of plot owners at Janata Housing lodged a compliant with Home Minister Shahara Khatun, alleging that Tanvir and his men had forcibly occupied their land to set up the industrial park.

Ordered by the minister to recover the "illegally occupied" land, the additional superintendent of police in Dhaka in his investigation found that Tanvir grabbed at least 19 plots there.

The probe report said the Hall-Mark MD also occupied and earth-filled spaces meant for lake, market and school under the housing project. Tanvir also erected boundary walls in efforts to occupy another 200 plots in G and E blocks.

The report, submitted to the superintendent of police (SP) of Dhaka, recommended legal action against Tanvir.

Asked, SP Mizanur Rahman told this correspondent last week that Tanvir had obtained bail in all the cases in connection with intimidation and land-grabbing. The SP then hurriedly hung up the phone, saying he was busy.

In April this year, Bangladesh Water Development Board in a letter said Hall-Mark erected half a kilometre long wall on the embankment of the river Dhaleshwari. On this occupied land to the south of Singair Bridge, the company has set up a factory, a warehouse and some security posts.

The Savar police took no action although the Water Development Board filed a general diary and wrote to the officer-in-charge of the station for reclaiming the land.

Retired wing commander Hasan Masud owns a five-katha plot at Janata Housing. He said Tanvir's men knocked down the makeshift structure and the boundary wall on his plot twice and hung Hall-Mark's signboards there.

He said at least 50 of the affected plot owners had filed general diaries with the Savar police over the last one year but the law enforcers had done nothing.

Late last year, a Dhaka court issued an arrest warrant for Tanvir, after Muksudur Rahman, a relative of a plot owner, filed a land-grabbing case.

Contacted, Savar Police Station Officer-in-charge Md Asaduzzaman said, "We have not taken any action in connection with the general diaries as the complainants did not maintain contact with us."

He admitted that there were about 30 GDs filed against Tanvir and his men over land grabbing.

Kamrunnesa Mohiuddin, whose makeshift structures were allegedly vandalised by Tanvir's men, sought help from the Dhaka Deputy Commissioner, Mohibul Haque, in vain.

Mohibul told The Daily Star that the district administration had no authority to recover private land from illegal occupation.

However, a retired additional secretary wishing anonymity said the DC as a district magistrate could issue an order to calm the feuding parties to avert any untoward situation.

Hall-Mark General Manager Tushar Ahmed refuted all the allegations against the company and his MD. He said his company bought more than 100 acres of land at Janata Housing in the last six years.

The developer of Janata sold out the project's community space to Hall-Mark, he added.

But Rafiqul Hasan Rizwan, site manager of Janata Housing, said his company did not sell any land to Hall-Mark.

Hitherto little known Hall-Mark has come to the limelight after the discovery that the company has swindled Tk 2,686 crore out of Sonali Bank's Ruposhi Bangla Hotel branch over the last two years.

Separate investigations of the Bangladesh Bank and Sonali Bank concluded that Hall-Mark had been given the sum mainly in loans against fake documents.

News: The Daily Star/Bangladesh/15-Sep-12

S.M. ZAHIDUL ISLAM

---

 Bangladesh Bank all on a sudden on June 14, 2012 has issued a circular on loan provisioning and loan rescheduling with several stringent conditions which have put commercial banks as well as entrepreneurs in a troublesome position. The circulars appeared as a bolt from the blue. Usually Bangladesh Bank issues important circulars after discussions with the stakeholders especially Association of Bankers Bangladesh (ABB) and Banks Associations Bangladesh ( BAB), the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Bangladesh Garment Manufacturers and Exporters Association (BGMEA). But in this case BB did not do that probably for apprehension of protests from them. It was wise if they issued those circulars with proper analysis. All the stakeholders believe that the circular was issued as part of complying with the conditions imposed by the International Monetary Fund (IMF) for availing USD 100.00 billion loan for the government.

In the preface of the circular it was inscribed that Bangladesh Bank recognises that a legitimate banking practice may allow for the renewal of a continuous loan or line of credit occasionally. However, BB is concerned that rescheduling (also known as “prolongation” or “evergreening”) may sometimes result in an overstatement of capital, when loans that have a low probability of repayment are carried at full value on banks’ balance sheets. Bangladesh Bank is hereby issuing this circular in order to communicate its policy stance that rescheduling should be done only in limited circumstances and under restrictions.

Yes, there were some anomalies in rescheduling some loans in the banking sector especially in Public Commercial Banks (PCBs). Is there any statistics against their logic? Probably its’ percentage is very negligible, not more than 2percent to 3percent out of their total portfolios. A total of 98percent borrower should not be punished for the misdeed of so called bankers. These are definitely malpractice in the financial sector, but that could be checked by proper monitoring through offsite and onsite supervision carried by BB. As part of remedy BB could go for online supervision, where their vigilance team could have access in the data centre of each bank, and then BB would validate that information to take decision later on. Bangladesh Bank inspectors hold the capacity to classify any account at any time. They could ask statement of evergreeing loan account, after verify the statement, quantify the volume, assessing the impact then they could take decision of classification to classify those accounts depending on the quality. The logic of keeping evergreening problematic loan in the portfolio is simply lame. Our banking and financing sector has undergone surgery by some inefficient executives of the central bank, who did not link the consequences of their decisions in the economy. Who also do not possesses the capacity to make understand the government about the consequences.

The objective of the issuance of circular is not only to check evergeeing the loan account and swelling the capital through increase of profit by showing the sick loan account as regular and reducing the banks operating profit and net profit but also to fell our banking sector and our economy in the deep trouble as per prescription of IMF. It is also not match up with South Asian nations banking practice. Though our central bank follows step of RBI (Reserve Bank India) to overcome any adverse global economic situation, in this case it is exception. This initiative will give competitive advantage to the Indian counterpart in the bi-lateral trade between the two countries. Comparison on provisioning on assets between Bangladeshi & Indian system:

RBI sets provision of Assets Classification as follows:

Standard Asset: 0.40 per cent. For agricultural and SME sectors it is 0.25 per cent. For personal loans, loans and advances qualifying as capital market exposures and commercial real estate loans, loans and advances to systemically important NBFCs-ND provisioning requirement is 2.0 %. Salary Earners' banks in Tier II ( banks have more than one branches) may provide for standard assets in respect of personal loans at the rate of 0.4 percent Sub standard- 10%

Doubtful (up to one year) :100% of unsecured portion plus 20% of secured portion Doubtful (one to three years) :100% of unsecured portion plus 30% of secured portion Doubtful for more than 3 years :100% of unsecured portion plus 50% of secured portion Loss : 100%.

W.e.f April 1, 2007- the provisioning norms for the secured portion of the doubtful assets more than three years are as under -60 per cent with effect from March 31, 2008 -75 per cent with effect from March 31, 2009 -100 per cent with effect from March 31, 2010 (ii) advances classified as ‘doubtful for more than three years’ on or after April 1, 2007- 100 %

Bangladesh Bank sets Provision as per BRPD circular -7 issued by Bangladesh Bank:

A.General Provision: Banks will be required to maintain General Provision in the following way :

• @ 1% against all unclassified loans (other than loans under Consumer Financing, Loans to Brokerage House, Merchant Banks, Stock dealers etc. and Special Mention Account.)

• @ 5% on the unclassified amount for Consumer Financing whereas it has to be maintained @ 2% on the unclassified amount for (i) Housing Finance and (ii) Loans for Professionals to set up business under Consumer Financing Scheme.

• @ 2% on the unclassified amount for Loans to Brokerage House, Merchant Banks, Stock dealers, etc.

• @ 5% on the outstanding amount of loans kept in the 'Special Mention Account' after netting off the amount of Interest Suspense.

• @1% on the off-balance sheet exposures. (Provision will be on the total exposure and amount of cash margin or value of eligible collateral will not be deducted while computing Offbalance sheet exposure.)

The writer is Senior Assistant Vice President of Jamuna Bank Limited.  HYPERLINK "mailto:zahid_2411@yahoo.com"
zahid_2411@yahoo.com

News: Daily Sun/Bangladesh/15-Sep-12

 

The printing of banknotes in obsolete machines has put the country and its people at risk of being counterfeit victims. Other important and security materials are also being printed amid risk.

A banknote [known as a bill, paper money or simply a note] is a type of negotiable instrument recognized as a promissory note, made by a bank, payable to the bearer on demand.

According to sources, the Security Printing Corporation Bangladesh Ltd [SPCBL], an organization entrusted with printing banknotes, non-judicial stamps and other important documents, cannot print required number of banknotes and match colour due to manpower shortages and dilapidated condition of the machines.

People within the government and the Board of Directors of SPCBL apprehended a great disaster if the organization fails to publish required number of quality banknotes and other sensitive documents.

This apprehension was expressed at the 178th board meeting of SPCBL presided over by its chairman and Bangladesh Bank Governor Dr Atiur Rahman on September 6, 2012.

Most of the machines used for the printing of banknotes and other important documents were purchased at the outset of SPCBL. Now new machine was set up before 2009-10 financial year.

Intaglio printing technology called Super Orlof Intaglio (SOI) press is used to print banknotes. As worm gear [a part] of SOI decays day by day, the whole machine becomes out of work. Parts of the 27- year-old press are not available in the local and international markets.

Finding no alternative, the authorities concerned made duplicate parts from Bangladesh Industrial Assistance Centre (BITAC) to run the press somehow.

A report submitted in the board meeting said required number of banknotes cannot be printed as long time is being wasted in matching colour. On the contrary, colour of notes cannot be matched properly when more number of notes is printed.

It is known that a number of one hundred thirteen crore eighty four lakh pieces of banknotes and one thousand two hundred seventeen crore and fifty seven lakh other security products (OSP) have been printed from this press in the current year.

Cheque books of various nationalized and private banks including Bangladesh Bank are printed from the SPCBL. A cheque book finishing machine was purchased from France for cutting, stitching and binding.

The corporation is not being able to meet the demand despite using the machine for two shifts round the year. Apart from this, the machine’s operational efficiency and the standard of the produced products has declined. The multi-cut unit of the machine remained inactive for the last two years.

According to the information placed in the board meeting, the demand of cheque books was 11,260,200 in the fiscal year 2011-12. Using the machine in two shifts, it is possible to produce around 24,000 cheque books everyday by the existing machine.

Counting 22 days as working day in a month, it is possible to produce some 63 lakh cheque books in a year (264 working days).

So another machine is essential for printing the cheque books. Also, an approval has come from the board meeting to purchase one more machine.

Former governor of Bangladesh Bank Dr. Saleh Uddin Ahmed said the printing activities of stamps, band rolls and many other important printing are being accomplished at the Security Printing Corporation besides printing notes.

So, machines with modern technology are needed for use in the corporation and it is important to ensure the quality of the work as many important printings of the state are served from here.

News: Daily Sun/Bangladesh/15-Sep-12